NYT Columnist Joe Nocera laughably calls Tim Cook a liar
As we reported previously, Tim Cook and two other Apple executives appeared before Congress earlier this week to discuss Apple's tax practices. The focus of the hearing centered on how Apple manages to keep the bulk of its foreign earned cash overseas and what might be done to incentivize Apple to bring that cash back to the US.
In an op-ed piece in the New York Times today, columnist Joe Nocera misconstrues the events which took place at the hearing and proceeds to characterize Tim Cook as a liar who, according to Nocera, learned how to create a "reality distortion field" from Steve Jobs.
I'm not sure if Nocera watched the entire hearing, but I did, and many of his characterizations of the events which took place are skewed at best, if not downright false.
Let's dive in.
On Tuesday, despite the overwhelming evidence presented by the Senate Permanent Subcommittee on Investigations that Apple engaged in dubious tax avoidance gimmicks, Cook claimed that Apple never resorted to tax gimmickry.
First off, given that the tax experts brought in by Congress testified that Apple's tax strategy doesn't run afoul of International Law, I fail to see how the evidence presented by the Senate Subcommittee overwhelmingly proves that Apple engaged in dubious tax avoidance gimmicks.
Call it semantics if you will, but Apple's tax mechanisms are set up in such a way as to minimize the company's overall tax liability, all within the confines of the law. As easily as one can call it tax gimmickry, another could just as quickly and accurately call it tax compliance.
Cook said, "We pay all the taxes we owe -- every single dollar." He added that Apple had never shifted any of its American profits to an offshore tax haven when, in fact, that is basically what it has done, routing tens of billions in pretax profits to a shell corporation in Ireland that exists solely to avoid taxes in the United States. He even said that the low taxes Apple pays overseas is on the profits of its overseas sales. Not to put too fine a point on it, but this was a flat-out lie.
On this point, Nocera has his facts completely backwards.
In its prepared testimony to Congress, Apple also emphasized that it has never shifted any of its American profits to offshore tax havens. This is true, despite Nocera's curious assertion to the contrary.
What Cook is saying here is pretty simple. Every single dollar Apple earns in the United States is taxed. Further, Apple, in no way whatsoever, moves any of its profits earned in the States abroad as to avoid paying US taxes.
Regardless of what you think about Apple's tax setup with respect to its foreign earned income, Apple has not routed any of its American profits overseas. While some companies may engage in such behavior, not one iota of evidence presented even hints that Apple does any such thing.
That said, Cook's assertion that the low taxes Apple pays overseas is on the profits from its overseas sales is accurate. Nocera calls this a flat-out lie, but conveniently neglects to explain why or how.
Instead, he proceeds to talk about how folks in the Senate hearing were eating out of Cook's hand.
In other words, Cook spent Tuesday claiming that the sun was setting when it was actually rising, and, predictably, by the time the hearing had ended, most of the senators were agreeing with him. Senator John McCain, the committee's ranking Republican, who had earlier labeled Apple "a tax avoider," was soon swooning over Apple's "incredible legacy."
Again, I watched the entire hearing and to say that most of the senators were agreeing with Cook simply isn't true. The notion that McCain came out guns ablazin' against Apple, only to be left swooning over Apple's legacy is misguided.
The fact of the matter is that Senators McCain and Carl Levin pulled no punches with Apple. They went after Apple hard, asked extremely tough questions and often times, really put Apple's panel of executives on the hot seat.
Comments regarding Apple's aptitude for innovation and its legacy were certainly made, but these were often made in the context of, "Hey listen Apple, we think you're a great company and all, but your tax practices seem shady."
In other words, praise for Apple was typically sprinkled in at the end of particularly tough question and answer periods. I encourage you to go back and watch video of Levin grilling Apple executives for an extended period of time. It almost gets uncomfortably and awkwardly intense. Levin was completely unswayed by any of Apple's testimony, it seemed. Nonetheless, Levin, at the end, noted that Apple makes great products, going so far as to say that his granddaughter has an iPhone.
Moving along, Nocera continues:
Indeed, Apple's fabulous success over the past decade or so - its creation of the iPads and iPhones that the world lusts over - is a large part of the reason it always gets the benefit of the doubt, whether deserved or not. Two years ago, when David Kocieniewski of The Times reported on General Electric's tax-avoidance prowess, a storm of protest resulted. Last year, however, when Kocieniewski and Charles Duhigg wrote about Apple's tax avoidance schemes as part of a series about the company that won a Pulitzer Prize, it was greeted mainly with yawns. Nobody really wants to hear anything bad about Apple.
At this point, I have to wonder if Nocera is simply trying to troll us. If anything, Apple's success with the iPod, iPhone and iPad is precisely why the company rarely gets the benefit of the doubt. Indeed, Apple's unprecedented success, coupled with its billions in the bank, seems to have created an environment where Apple is often held to an entirely different standard than other companies.
Furthermore, the notion that the New York Times' series of articles was greeted with yawns is laughable. It did win a Pulitzer Prize, right?
On that note, Philip Elmer-DeWitt of Fortune wrote the following this past April:
The fact is, the New York Times knows how to win Pulitzers -- better than any other journalistic operation. It has now won a record 112. It employs editors who specialize in identifying Pulitzer-winning topics and assigning reporters who will bring them home.
And that's what it set out to do -- with Apple as its conspicuous subject -- in seven major stories capped with a self-serving kicker that suggested that it was Times' reporting that led to substantive changes in the working conditions in China's electronics factories.
As for the claim that no one wants to hear anything bad about Apple? That's even more laughable.
If anything, it stands to reason that the NYT specifically targeted Apple because it knows that people love to read articles which badmouth Apple. It's a sure-fire way to generate an abundance of pageviews and attention, no matter how factual the assertions may be. Heck, some columnists have even made careers out of exploiting this dynamic (I'm looking at you Rob Enderle).
Almost comically, Nocera later in his piece admits that Congress has in fact singled out Apple, just mere paragraphs after claiming that Apple is somehow always afforded the benefit of the doubt.
In short, people love to hear anything bad about Apple. Who doesn't enjoy, after all, watching a giant fall?
Nocera goes on to explain Apple's tax setup abroad. Subsidiaries, holding companies, Ireland -- it's all there.
But here's the thing -- this isn't an Apple issue. A vast number of multinational corporations implement the same tax minimization schemes as Apple. Many companies, from Google to Pfizer to Coca-Cola all hold billions of dollars in offshore cash that they are under no legal obligation to repatriate back to the US. And with the United States' extremely high 35 percent corporate income tax rate, can you blame them?
So sure, Apple has about $100 billion in profits overseas, but when you tally up the money all US-based corporations hold overseas, we start talking about trillions of dollars. Again, this isn't an Apple issue; it's a tax code issue.
Howard Gleckman highlighted this very fact on the Tax Policy Center Blog:
The remarkable thing about the Senate Permanent Investigations Subcommittee's report on Apple Inc.'s corporate tax avoidance is how unremarkable it is.
Because Apple is so profitable, the dollars involved will certainly attract attention (this is a Senate committee after all, so that is the point). The report alleges Apple reduced its U.S. corporate income tax by an average of $10 billion-a-year for the past four years. Since the corporate levy generated only about $240 billion in 2012, $10 billion foregone from one company is a very big number indeed.
But while it added a few interesting twists, Apple cut its taxes with the same tools multinationals have been using for years to minimize their worldwide tax liability. And if there is a scandal, I suppose it is the very ordinariness of these transactions. Apple's tax avoidance shop, it seems, is a lot less innovative than its phone designers.
It's also worth pointing out comments made by Senator Rob Portman during this week's hearing:
If we don't reform the tax code, we're competing with one hand tied behind our back. Almost all of our industrial competitors have shifted to a territorial system including the UK, France, Germany, Japan. I think that's the right way to go. They don't tax active business income earned beyond their borders and their businesses are more competitive as a result. $1.5-$2 trillion is locked up overseas. That money is being deployed to put factories and R&D overseas. We've got to move quickly. No other nation erects such a high barrier to bringing earnings back to the US. Every one of our global competitors have reformed their tax systems since we last reformed ours. Not just the rate, but the code. If we don't reform, we'll continue to lose opportunities.
Nocera, with his seeming focus on Cook's reality distortion field doesn't seem to grasp that the real issue is much larger than Apple.
Subscribe to Newsletter
Software Updatesmore updates
- Logic Pro X update brings AirDrop support, new effects, tools, and more
- Parallels Access 2.5 released, adds file manager, computer-to-computer remote access
- The Google Translate iOS app is about to get a lot smarter
- Dropbox adds file/folder renaming and Office document editing to iOS app
- Vizzywig 8xHD price tag now a very affordable $49.99
- Automatic targets teen drivers with License+ service