Apple will appeal yesterday's ruling from the EU that requires it to pay $13 billion of back tax to Ireland.
So too, come to that, will Ireland.
As a matter of fact both have to. The necessity does not arise for any legal reason: indeed, I think the chance of their legal success is remote. Instead their need arises because each sees itself as representing a powerful interest group within the forces of globalisation.
Apple will, even if it will not say so explicitly, see itself as the representative of all those multinational corporations that have believed it their duty to arbitrage tax and other regulation to minimise their costs to supposedly maximise shareholder returns and to actually provide the basis for paying astronomical executive bonuses.
They have seen tax haven activity as an integral part of this process. Years of familiarity with the games that tax lawyers play has meant they have ended up thinking there is nothing unusual with headquarters companies that have no staff or apparent trade recording vast amounts of profit and paying no tax on it anywhere. They pretend that they cannot even see what the problem with that might be. Apple's appeal will then be about the right to create legal fiction until such time as the law no longer applies, as was the case in point that aggrieved the EU so much.
Ireland's appeal is different. It is about the right of a political elite to so effectively capture a democracy that a place is not run for the benefit of the people of that jurisdiction but instead for the benefit of a small, wealthy, international elite and the companies that they manage, with which elites' shoulders those local politicions want to rub. Ireland's government will in this sense see itself as the representative of all tax havens and of those politicians who have such contempt for their electorates that they can turn down €13 billion of taxes.
What that means is that when these appeals happen, as surely they will, what will really be on trial will be goibalisation itself. Globalisation is the market based expression of the ideology of the Washington Consensus. It was always intended to favour a few, increase inequality, buy favour wherever it could find it, capture legislatures for its own purposes when that was necessary and create spaces veiled in secrecy where the rule of law that applied to the little people could be circumvented by the few. This is precisely why tax havens had to exist: they are not an accident in their modern form. They are instead a deliberate part of a design.
And you can see why Tim Cook for Apple and Michael Noonan for Ireland are angry. The EU has had the temerity to expose their game. It has said competition matters. It has said the rule of law matters. Worse, it has said there must be a level playing field as the economic theory of markets suggests is essential when for so long the supposed high priests of market forces have believed that the playing field must be tilted in their favour. Everything they have stood for, all the games they have played and all the belief in their right to be advantaged at cost to others has been exposed by the EU as not just immoral but actually illegal because it compromises the basic premises of market economics to which they too think they adhere. They have been called hypocrites. And it hurts, a lot.
Which is precisely why they will appeal the decision. Their pride will demand it.
And that is also precisely why they must lose.
Few would have expected it, but the EU has put globalisation on trial. And it has every chance of winning. The world will never be the same again if it does. But it will be a great deal better for it.
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It may not go that far. Consider the following scenario:
– no appeal is likely to be heard this side of November.
– Trump finally, perhaps, has something that he can leverage sensibly for “Make America Great Again” – you will have observed that the US political establishment are not happy about this decision.
– Trump wins the election.
– Plans to build the Mexican wall are shelved for a trade war with the EU, which is supported by Putin.
– The deal is: let multinational big business do what it wants, or be steamrollered.
– The EU caves. Apple and Ireland win.
Likely? I don’t know. But possible? Certainly.
Not a hope
The EU would not accept it
Why? Because there is no way the people of Europe will
Since when did the EU ever take any notice of its citizens? It is a project of an elite.
Percentages against “ever closer union” range from 60% in France to 85% in Greece. But the federalist bandwagon rolls on…
Which is very odd since it seems to do better than most at helping ordinary people
Please explain the paradox
This case puts the whole Laffer curve argument to bed. Ireland already offers a very low corporation tax rate, but Apple didn’t want to pay it, and so used their leverage with the Irish government to negotiate a de facto 0% rate.
Tim Cook’s attitude to Apple’s tax affairs is quite unbelievable. He seems to think that because Apple creates jobs (entirely for its own benefit and not out of some philanthropic impulse) it should not be burdened with the responsibility to pay tax on its business activity. That attitude, and the degree to which it is prevalent amongst the CEO class, demonstrates the extent to which governments have kowtowed to corporate power.
nb: It is instructive that nobody uses the Laffer curve to argue that taxes may be below the revenue optimising rate.
If only! If only this had happened last May.
OK, much of the Brexit vote was about immigration, but much was also about a vague feeling of ‘taking our country back’. The Brexit voters thought that meant taking it back from the EU. Whereas we actually need to take it back from the international elte. And until now it looked like the EU was there to further the interests of that elite.
Now this. If this is a real sea change in what the EU does, then it’s such a big sea change that some form of a re-run of the Referendum should now be on the opposition agenda. Had this happened last May, the Referendum result would surely have been Remain.
some friends and I made this point last night.
Much as I would love to join-in the euphoria I think it’s more than a little premature. Even if one assumes ultimate victory for the EU in this case – which it’s far too early to do – one swallow doesn’t make a summer.
“…Whereas we actually need to take it back from the international elte. And until now it looked like the EU was there to further the interests of that elite” (mike w)
precisely: that’s *exactly* how the eu has looked. What else was the troika’s treatment of Greece than a classic illustration of the truth of that?
If – a very big if – this ruling (by the competition commissioner, remember, not by the Council) were to turn out to be signalling a sea-change of fundamental policy-stance by the EU’s governing organs in their entirety, and if they were to prove that they really mean it and are determined to persevere with it then yes, this will deserve to go down in history as marking the day from which neoliberalism’s gains began at last to be rolled-back, akin to when in 1890 the Sherman Act was passed, inaugurating the epoch of “trust-busting” in the USA.
That’s a vertiginously tall order, having regard to the fact that since the ‘eighties (at least) the EU has made itself a bastion of neoliberalism.
Personally I doubt both the conviction and the strength of resolution of those who actually run the EU (which is to say:- most emphatically NOT the populace) to see through to the bitter end the execution of such a massive reorientation in underlying political philosophy as this would be.
I devoutly hope I’m wrong.
I hope so too
Once the uk exits the Eu presumably we won’t be burdened by all the state aid stuff so apple can book all their sales here with a 15pc ct rate?
You optimist
If we want anything to do with the EU we will be signed up to all this
And the OECD BEPS process is the new factor here
There has never been a better opportunity than now to re-launch the idea of a CCCTB and it will probably be many years before there is another. Please Richard, go on the attack now.
The key issues are that it is common, consolidated and apportioned (rather than attributed based on how the conglomerate chooses to book things). How the base is calculated and how it is apportioned are important but they are details that can be filled in later. The critical thing to push for now is the principle.
It features heavily in my new book
But you may be right: a blog is needed
An appeal that Ireland would be a part of is not a certainty by any stretch. The government may have to fall and a Fine Gael-only administration (slim chance of that based on this year’s general election result) take power for that to happen.
http://www.independent.ie/business/irish/plan-to-fight-13bn-windfall-will-fuel-protest-say-tds-35012147.html
https://www.ft.com/content/2af3003c-6f6c-11e6-a0c9-1365ce54b926
See my blog this morning Ralph
Could Apple and the other corporate, global players be obliged to invest part of their surplus offshore cash sumps in government development bonds (in those counties in which the cash was generated) rather than languishing in less productive bank deposits?
Perhaps introduce apportionment to the international tax stage…
Surely these corporate “savings” are removing much needed liquidity that could be applied to debt free education, poverty, etc
I am working on ideas on this issue
Richard
It is interesting to see this EU decision being so strongly framed as “anti-globalisation” and to that extent “anti-neo-liberal”. Yet the decision is based on the EU’s dislike of “state aid”, which for many on the left is an essential tool of economic management and was a key reason for the opposition of many on the left to the UK’s membership of the COmmon Market in the original referendum. So while it is good to see Apple and Ireland being bashed by the EU for their outrageous tax avoidance stunts, it is actually based on a doctrine that substantially reduces the policy space for national governments, and which doctrine is itself actually based on a fairly extreme version of neo-liberalism.
Regards
Gerry
I get all the paradoxes
Ireland’s “outrageous tax stunt”?
You mean taxing Apple’s profits accrued in Ireland? On what basis do you think they could tax profits earned elsewhere? Since when has any EU country had a mandate to do that? Uncle Sam’s decision to allow international profits to go untaxed until repatriated is at the heart of the problem. Interesting to see prospective alternative headquarters being proposed by Turks and Brexiteers offering even more favourable tax terms under the rubric of freedom from EU regulation.
This overlooks two facts:
1. The EU is all we have to stand up to multinationals; individual countries can’t.
2. US multinationals do not locate in Ireland for tax reasons: http://www.taxjustice.net/2015/03/12/did-irelands-12-5-percent-corporate-tax-rate-create-the-celtic-tiger/
The UK is Ireland’s only rival for US FDI in the EU given that English language and the single market are the biggest, but far from the only, draws. Already there is an influx in advance of Brexit. Lower UK corporation taxes won’t change this.
Stupid question perhaps Richard, but what are leaders of countries like Ireland actually gaining from companies like Apple? It’s certainly not benefiting Ireland. Is it the glory of having Apple base themselves in the country or perhaps the possibility of alternate ‘careers’ following politics?
They honk the PAYE and employment is enough