Apple 2.0

Covering the business that Steve Jobs built

'Not Apple's Fault'

May 27, 2013: 7:41 AM ET

A former U.S. senator comes to Tim Cook's defense in the New York Times' sister paper.

Source: Robert Paul Leitao

Source: Robert Paul Leitao

FORTUNE -- "As a multinational company, Apple sells products and earns profits in dozens of countries," writes former senator John E. Sununu (Rep., N.H.) on the op-ed page of Monday's Boston Globe. "The U.S. government, unlike most others, attempts to collect taxes on all of those profits, not just those earned in the United States."

And because the U.S. taxes earnings at a higher rate -- 35% -- than every other country except Bangladesh and Guyana, U.S. multinationals go through all kinds of hoops to avoid reporting them. Independent experts who spoke before and after CEO Tim Cook at last week's Senate hearing testified that Apple's (AAPL) tax avoidance strategies are relatively conservative compared with many of its peers. Some multinationals shift 100% of their income to subsidiaries in Ireland and other low-tax countries.

Tim Cook testified last week that Apple pays U.S. taxes on income from the sales of its products in the Americas and foreign taxes on income from the rest of the world (see pie chart above).

In one of a half-dozen articles the New York Times has published attacking Apple's tax structure, a Times columnist called that testimony -- given under oath -- a "bald-faced lie." (See Joe Nocera does it again.)

The editors of the Boston Globe (a newspaper that happens to be owned by Times) took a different view. They published Sununu's piece under the headline Not Apple's Fault: Congress wrote the tax laws, so why blame CEO for obeying them?

"By refusing to feel guilty about the results produced by a 30-year-old corporate structure, Cook placed the responsibility for the taxes Apple pays where it belongs: on the US Congress," Sununu writes.

"Senator [Carl] Levin and his staff believe that it is wrong for companies and individuals to engage in behavior that avoids taxes. They hoped that calling out Cook might generate support for legislation that targets companies like Apple. Instead, they mostly provided a lesson in the complex, convoluted, and often uncompetitive nature of America's corporate tax code. They also provided a reminder that those responsible for the mess were asking the questions, not sitting at the witness table."

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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