Fact-Checking The Fact-Checkers

Journalism's fact-checking process is supposed to identify errors, or outright lies, by presenting clear, undeniable facts that contradict someone's statement. Instead, however, the process has become a means of blurring the line between fact and opinion -- between easily demonstrable truths and more abstract, more challengeable viewpoints.

For a striking example, consider this recent N.Y. Times story about the European Union's claim that Apple illegally avoided $14.5 billion in taxes by securing a unique, "sweetheart" deal from Ireland's government.

Headlined "Fact-Checking Apple's Claims on E.U. Tax Ruling," it deals with a public letter, from CEO Timothy Cook, denying the accusations. After "consulting with five tax experts to fact-check the chief executive's statements," the reporter concludes: "While Mr. Cook was technically truthful, he omitted some context and shifted the spotlight from the thrust of the European Commission's case: whether Apple took advantage of loopholes in Irish tax laws."

Now, it is certainly legitimate for a fact-checker to take context into account. If a politician campaigns on having voted to reduce his constituents' taxes, when really he voted to cut one minor tax and to increase five major ones, journalists should include that context in their reports. But here, as we shall see, the reporter's disingenuous interpretation of "context" -- and of "the thrust of the European Commission's case" -- leaves the reader with the vague impression that there is some truth on each side, when in actuality no fact asserted by Apple is even challenged.

Let's examine five significant points in the letter. This is how the Times addresses them, alternating between Cook's statements and the tax experts' "fact-checking":

COOK: "In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes we owe."

FACT-CHECK: "While a company like Apple may pay all the taxes it owes, it also tries to find legal ways to owe as little as possible. The European Union wants to crack down on the ways that companies minimize their tax bills."

So the "fact-checker" doesn't question Apple's claim. The E.U. says Apple failed to pay $14.5 billion in taxes, and Apple says it paid everything owed. Apple would doubtlessly agree that it tries to minimize its taxes; it maintains only that it did so legally and owes nothing more.

COOK: "[The E.U.] alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, not did we receive, any special deals."

FACT-CHECK: "The European Commission makes clear, and tax experts agree, that Ireland let Apple determine how much of the income that it generated in the country would be recognized and taxed there."

Based on what? The charge is not that Apple chose to operate in Ireland because of the low tax rates or legal "loopholes," but that it unlawfully avoided taxes. If the way "Ireland let Apple determine" its taxes was through a private, clandestine arrangement, available only to Apple, there could indeed be some illegality. But no basis for this contention is provided. All we're told is that the accuser "made it clear" and "tax experts agree"--which is precisely what Apple denies.

Further insinuating that something shady occurred, the Times notes that the income at issue was "put in other structures that were effectively stateless" and thus "not taxable anywhere--not even in Ireland." Yet it is taxable--in the U.S. Under American law, however, the taxes are payable only if and when the income is repatriated--a law applicable to all companies' foreign income. A tax expert adds that in America individual states can legally provide inducements tailored to a particular business and "can fall all over themselves to offer subsidies and loopholes, but that is exactly what is illegal in Europe." Fine. But Apple claims no such deals were made with Ireland. Where then is the refutation?

COOK: The E.U. is "proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been."

FACT-CHECK: "[The E.U.] is simply asking Ireland to enforce the tax rate that it has and close loopholes that allow companies like Apple not to recognize large portions of the income they generate in Ireland and pay even less."

Since Irish law regards the income in question as not taxable, the country plainly is enforcing its tax code. When the E.U. wants Ireland to "close loopholes," what does that express except a desire that Ireland act according to what "the law should have been" but wasn't?

COOK: "[N]early all of our research and development takes place in California, so the vast majority of our profits are taxed in the United States" (and not taxable under Irish law).

FACT-CHECK: "Apple has also kept more than $200 billion offshore. That money could someday be brought home and taxed, but Apple is in control of whether or not that actually happens."

Here is the only acknowledgement that the money is indeed taxable upon transfer to the U.S. And if this is what was meant by the earlier fact-checking claim that "Ireland let Apple determine" its taxes, is it somehow evidence of impropriety that the decision to transfer the income rests, according to American law, with Apple?

COOK: "[T]he most profound and harmful effect of this ruling will be on investment and job creation in Europe."

FACT-CHECK: "There is support among tax experts for this statement," the Times concedes. One such expert says that "so many countries are motivated to use low tax rates to generate business that Europe could lose multinational business if companies are discouraged by the commission's ruling." Nonetheless, this fact-checker warns, we cannot afford the loss of government revenue "[i]f we allow companies like Apple to pick [their] tax haven," because "the taxes given up globally could be used for public service, worker training and infrastructure."

In other words, although lower taxes stimulate investment and production, the more important value -- i.e., the redistribution function of a global welfare state -- requires a willingness by producers to pay higher taxes.

So once all the fact-checking is stripped down to essentials, that is the crucial "fact" Apple supposedly got wrong.