by Wolf Richter, Wolf Street:
A “Back Door” to Fiscal Union
The Apple Tax is about a lot more than just Apple and the billions of euros in backdated corporation tax it purportedly owes to European governments. It even goes far beyond the question of how — and how much — central authorities should tax recalcitrant multinationals that make billions of dollars in profits on their turf but share few or none of the proceeds.
What is most at stake is the question of who gets to set the fiscal rules in Europe’s foreseeable future. One thing is clear: if Brussels gets its way, it’s not going to be the national government of each member state. And that could be very bad news, at a very bad time, for a number of European economies, in particular Ireland, Luxembourg, and the Netherlands.
“Total Political Crap”
The EU’s Competition Commission slapped Apple with a €13 billion retroactive tax bill. That money is apparently owed to the government of Ireland, its decades-long partner in one of the biggest tax-avoidance schemes of living memory. The Commission argues that the arrangement cooked up between Irish authorities and Apple’s tax lawyers and accountants represented illegal state aid, enabling the U.S. company to get away with paying an effective taxation rate on its European profits as low as 0.005%.
Naturally, Apple does not want to pay the money. Apple’s chief executive, Tim Cook, even went so far as to call the EU ruling as “total political crap”:
They just picked a number from I don’t know where. In the year that the commission says we paid that tax figure, we actually paid $400 million. We believe that makes us the highest taxpayer in Ireland that year.
The government of Ireland doesn’t want the money either, despite the fact that it could certainly do with it: at 128% of GDP, it boasts one of the highest levels of public debt in Europe, which is no mean feat these days. The EU ruling comes at a time of growing concern about the potential fallout from the decision by Ireland’s closest neighbor and second biggest single trading partner, Britain, to leave the EU, which according to some reports is hurting the Irish economy even more than the UK’s.
A “Back Door” to Fiscal Union
Irish Finance Minister Michael Noonan told Irish broadcaster RTE on Monday that: “As far as I am concerned there is no economic basis for this decision.” He added: “They [the European Commission] don’t have responsibility for taxes and they are opening a back door through state aid to influence tax policy in European countries when the European treaties say tax policy is a matter for sovereign governments.”
As a Member State of both the EU and the Eurozone with a “business-friendly” environment that is brimming with local, English-speaking talent, Ireland is an enticing base for global multinationals. Or at least was.
Now that the Commission appears determined to use the popular canard of corporate tax avoidance as justification for expanding its own powers through the homogenization of taxation rules and practices across the 28-member Union — a vital first step toward the long-cherished goal of fiscal union — Ireland’s days as a grudgingly tolerated tax haven on the EU’s periphery are almost certainly numbered.
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