Apple Responds to Tax Criticism

Apple CEO Tim Cook is using his persuasive communication skills to address the company's avoidance of billions in taxes.

Cook appeared on Capital Hill and received a surprising number of compliments from the nation's lawmakers. Committee Chairman Senator Carl Levin, for example, said, "We love the iPhone and the iPad." Libertarian Ron Paul also defended the company: "I'm offended by the spectacle of dragging in Apple executives. What we need to do is apologize to Apple and compliment them for the job creation they're doing."

Still, the panel accused Apple of creating offshore "ghost companies" to avoid paying taxes. Apple shifts as much as $100 billion to these entities, saving $7 billion in taxes in 2011, according to one estimate.

Rather then deny the accusations, Cook blamed the outdated tax system: "Unfortunately, the tax code has not kept up with the digital age." By deflecting attention away from Apple and towards loop holes that should be closed, Cook effectively "disarmed" (to use The New York Times' word) the Senate committee.

Of course, Apple isn't the only company avoiding taxes. According to one study cited by Senator Levin, 30 of the country's largest multinationals "paid nothing in federal income taxes over a recent three-year period. Zero."

Discussion Starters:

• Watch Tim Cook's opening statement in the Senate hearing. What are his strongest and weakest arguments?
• Watch the  rest of the Senate hearing. Which questions are most and least effective?
• How does Cook use delivery skills to persuade the committee?