Apple: a €13bn tax bill

The Brexit vote is looking wiser all the time, said The Spectator. Although leaving the EU is not without risks, it’s increasingly clear that these are outweighed by the perils of remaining in this flailing institution. Just look at Brussels’s arbitrary decree last week that the Irish government should recover a whopping €13bn in back taxes from Apple, whose European headquarters is based in Cork. For years, the EU has been trying to browbeat Ireland into raising its level of corporation tax from the low rate of 12.5%. Having failed in that effort, it has come up with “a new line of attack”: declaring that tax breaks extended to Apple under deals first reached 25 years ago contravened EU competition law. Both Apple and the Irish government are appealing against the ruling. If the EU acquires a “reputation for unpredictable and retrospective tax raids”, it will only deter the investment and jobs the bloc desperately needs.

The idea that the EU is behaving like some “supranational tax bully” is a complete “myth”, said Edward Kleinbard in the FT. The EU Commission has no quarrel with Ireland’s 12.5% corporate tax rate. Its complaint is simply that Ireland gave special treatment to Apple by offering it hidden subsidies. If Dublin had promised to give Apple s220,000 in cash every year for each job it located in Ireland, that would clearly have amounted to a forbidden form of state aid under EU rules. Yet this, in effect, is what the sweetheart deal between Apple and Dublin delivered. The only difference is that, rather than writing cheques to Apple, Dublin allowed it to pay almost no tax (according to the commission ruling, Apple paid an effective corporation tax rate of just 0.005% on its European profits in 2014).

So is Britain now poised to replace Ireland in the “affections of tax-shy global corporations”, asked Fintan O’toole in The Observer. Many Brexiters eagerly hope so, but their excitement is misplaced. For one thing, authorities everywhere are now cracking down on the worst excesses of corporate tax avoidance. Ireland’s own tax regime was toughened up last year thanks to a campaign by the Organisation for Economic Cooperation and Development (OECD) – a campaign that the UK, another member of this non-eu body, has also signed up to. More to the point, it wouldn’t make sense for the UK to try to emulate Ireland by becoming, in effect, a “tax haven” for big corporations. Ireland only did it as a “last resort”, and the strategy came at a cost: the “Celtic Tiger bubble was one of its more catastrophic products”. The bottom line, as Dublin has discovered, is that these low-tax pacts are not sustainable, politically or socially.