The US Senate grilled Apple’s CEO Tim Cook over Apple’s practices of reallocating profits in other countries in order to avoid paying the full corporate tax rate in the US.
The current tax environment for multinational corporations is the following: multinational corporations are taxed on their total global earnings in the US, while in other countries those corporations are taxed only on profits that are earned within the respective country’s border. This incentivizes corporations to put all of their foreign profits to other countries and not repatriate them back to the US, because those profits are taxed at a high rate once they come back to the US. (Hook and Yadron; Wall Street Journal)
This hearing is a waste of time. If Senators feel that Apple unfairly is taking advantage of the tax code system, then the problem points to Congress itself for not reforming the tax code. It’s obvious that there is a tax code problem within the country, so what’s the point of having this hearing? To shame Apple?
Senators can make moral judgments on whether Apple’s tax avoidance practices are right or not, but the fact remains that Apple did not do anything illegal under the current system. Congress, not a multinational corporations like Apple, have the power to change the current tax code to close the loopholes and make everything simpler. But so far, it’s all a show and no legislative progress.
Tim Cooks meeting with the Senators highlight a broader trend in Congress. Congress loves to highlight issues in these hearings, because our representatives get free publicity over the news networks. But there is a lack of legislative progress on those same issues that need to be fixed by Congress. It reveals Congress’ obsession on being on television and a lack of leadership to fix problem by legislation.
