Matt Gardner, the director of the Institute on Taxation and Economic Policy, took a look at Tim Cook’s terrible letter to EU consumers regarding Apple’s tax evasion, and pretty much tears it to shreds.
Apple created a complicated web of subsidiaries to avoid taxes, and the Irish government allowed it. Both the company and the country were complicit in this agreement. The idea that Ireland gave Apple guidance on “how to comply correctly with Irish tax law” makes both parties sound less guilty than they are. A better characterization would be that Apple cooked up a tax-dodging scheme, and Ireland allowed it.
Further along, Gardner actually opens up a major can of worms, arguing that either Apple provided false figures in its annual report, or Tim Cook is lying in his letter to EU consumers:
It doesn’t appear to be even remotely truthful based on the numbers they publish in their annual reports. Each year they report that the majority of their profits are earned outside the U.S., with roughly a third (on average, over the past five years) coming from the U.S. When you look at the 10K, the annual report for 2015, you see the company reports earnings of $72 billion worldwide, and just one third of those profits are attributed to the U.S. And yet Cook’s statement says that the vast majority of their income is taxed in the U.S.
We think that is a very low estimate. It certainly appears that the company is shifting profits out of the U.S. and into tax havens overseas. So one of these things must not be true: Either the numbers presented to shareholders in their annual report are false, or Tim Cook’s new statement that the majority of its profits are taxed in the U.S is false. They both can’t be true.
That’s a bold claim to make, but it’s hard, if not impossible, to argue with Gardner on this one. Since it’s incredibly unlikely Apple is falsifying its annual reports, the most logical conclusion is that Tim Cook is lying in the open letter.
Tim – if you find yourself in a hole, stop digging.