Issue of the week: Apple vs. the EU
Is the EU’S Apple tax ruling justice or back-door protectionism? And what does it mean for Britain?
“The tax arrangements of multinationals have rarely been out of the headlines in the past half-decade,” said the Financial Times. But the EU’S Competition Commissioner, Margrethe Vestager, “has raised the stakes”. This week, she ruled that Apple’s “sweetheart” tax arrangements in Ireland, which allowed the US tech giant to pay corporate tax as low as 0.005% in 2014, were illegal under EU state aid rules – and ordered the Dublin government to recover a record €13bn in back taxes from the tech firm. The ruling has infuriated Washington, which has accused Brussels of behaving like a “supranational tax authority”, and it will ramp up transatlantic tensions. Both Apple and the Irish government have vowed to appeal.
There’s something “a bit surreal” about Ireland turning down a €13bn “gift from Brussels”, said Alistair Osborne in The Times. Clearly, Dublin doesn’t want to jeopardise its status as an attractive base for multinational companies. But, following six years of austerity, the government will face considerable public opposition: the payout would cover Ireland’s annual healthcare budget. Moreover, “there’s a big difference” between keeping corporation tax rates competitive, at 12.5%, and handing Apple a deal that cut its 2014 tax rate to nothing, via “some wheeze with imaginary head offices” that Vestager found “existed only on paper”. Even so, “the biggest culprit here is the US”. Were it not for America’s uncompetitive corporation tax rate of up to 40%, “US multinationals wouldn’t have the same incentive to cheat”. Yet the American complaint that the EU “systematically” discriminates against US businesses, while favouring its own, is “valid”, said Matthew Lynn in The Daily Telegraph. Ikea, for example, has been widely criticised for shuffling earnings between different subsidiaries, “but very little action has been taken against it”. If the Americans are right that the EU is “using tax and monopoly investigations as a form of back-door protectionism”, it has worrying implications for the UK. Once outside the bloc, “we are likely to be targeted as well”.
There are certainly worries for Britain outside the bloc, said The Independent. But the chief problem lies in how we will tame “over-mighty business”. Tax justice is an “all-too-scarce commodity these days”, but at least the EU has the clout to do something about it. “It is painful to think what position HM Treasury will be in in these sort of scraps, post-brexit.” Were we to follow the Irish example, and leave companies virtually untaxed in return for locating jobs in Britain, Europe “might well retaliate by restricting access to the single market still further”.