Dear Commons Community,

Apple is the latest corporation that has had to explain its tax strategies namely the shifting of income to foreign countries to avoid paying taxes here in the United States.  In a hearing before the U.S. Senate, Apple CEO Tim Cook explained the necessity for what it does as based on the need to compete in the global market place.   Joe Nocera, in his New York Times column, analyzes Mr. Cook’s position and finds it lacking.

…”as documented both by The Times and the Senate subcommittee, Apple is as much an innovator in tax avoidance as it is in technology. Take, for instance, a scheme known as The Double Irish, which it largely invented and which many American companies have since replicated. This strategy, which was the primary focus of Tuesday’s hearing, involves setting up a shell subsidiary in an offshore tax haven — a k a Ireland — and transferring most of Apple’s intellectual property rights to the dummy subsidiary. The subsidiary, in turn, charges “royalties” that allows it to capture billions of dollars in what otherwise would be taxable profits in the United States. In Ireland, according to Apple, it pays an astonishing 2 percent in taxes, thanks to a deal it has with the government. (The Irish government denies giving Apple a special deal.)

Here is another whopper from Mr. Cook on Tuesday. He said that his company not only doesn’t violate the letter of the law, that it doesn’t even violate the spirit. He may be right on the first part, but he is wrong on the second. As the subcommittee’s chairman, Carl Levin, the Michigan Democrat, pointed out to me on Wednesday, one of the main goals of American corporate tax policy is to tax profits in the jurisdiction where they are produced.

“That intellectual property and patents are the crown jewels of the company,” Levin said. “The Irish subsidiary had nothing to do with creating those crown jewels. It has no employees. It has no offices. Yet most of Apple’s profits are now offshore because they were able to utilize a shift of their intellectual property to a tax haven.”

It appears that Mr. Cook’s Apple story has worms!

Tony