Tim Cook, the CEO of Apple, had a choice, and he chose badly.
Instead of being candid and working as a partner with Congress, for the sake of his country, he chose to do what politicians do -- he prevaricated to protect his own interests. He distorted, deflected and fundamentally lied. He could have been honest about how his company, along with many other American organizations, is finding ways to avoid paying its fair share of taxes. But he didn't. He claimed his company was paying the U.S. government exactly what it owed. Cook said, "We pay all the taxes we owe. Every dollar." Technically, this was the truth. Apple hasn't committed a crime. It has followed the tax code. But then he added that Apple has never shifted its profits to offshore tax havens -- which was a shameless lie. It's exactly what Apple is doing with its earnings. Before the Permanent Senate Subcommittee on Investigations, Apple's CEO Tim Cook lied. With a straight face. To a group of elected officials who did little more than fawn over him.
As Joe Nocera laid it out recently in a brief and powerful New York Times column, Apple is using loopholes in the code to escape corporate taxes using a scheme called The Double Irish. Here's how it works. You set up a shell corporation in Ireland, where corporate taxes are a fraction of what they are here, and you simply funnel tens of billions in pretax profits into that corporation. We're not talking simply about money earned in Ireland or anywhere else overseas. No. Ireland is where all of Apple's income goes to get laundered, essentially. In other words, Ireland is the new Cayman Islands, where the majority of our hedge funds are domiciled, for the same reason. As a result of this dodge, Nocera points out, Apple has reduced its tax rate on corporate profits from 35 percent to 10 percent. He also points out that Apple isn't alone. General Electric has essentially figured out how to game the tax code so effectively it pays almost no taxes at all.
In fairness to Congress, and to any other apologists for Apple, this country needs innovators. Apple is one of the shining stars of American business. Under the leadership of Steve Jobs, it has had an incredible record of producing gadgets that quickly become essential companions of daily life. People don't simply own an iPhone or an iPad. They have friendships with them. And this country desperately needs leadership from companies like Apple -- if anyone could be setting an example for how to climb out of this current economic pothole, it's Apple. Yet, by the same token, the greed and deceit lurking behind Tim Cook's testimony are precisely what are dragging us down. Yes, we desperately need to revise our tax code. No one wants to punish Apple for becoming a brand almost synonymous with American ingenuity. But this country desperately needs to balance its budget, reduce the debt and pour the riches we earn back into our economy through new private-sector jobs. Deceptive schemes that observe the letter, but not the spirit of the law, to hide and pocket billions in profit aren't just an affront to hard-working Americans who dutifully pay the government what they actually owe, but a betrayal of the ethical principles have made this country what it is. I would have respected Cook if he had pointed out how the tax code needs to be changed, and how his company would simply pay higher taxes -- if required by law to do so. But he didn't. And, even worse, it appeared that hardly anyone else in the room cared.
Does it seem to you, as it does to me, that deceit seems to have become the air we breathe now? We can choose better. We can choose to be honest.
Peter Georgescu is the author of The Constant Choice.