A Win for Ireland and Apple — and a Loss (For Now) for the EU’s Protectionists

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The logo of Apple company is seen outside an Apple store in Bordeaux, France, March 22, 2019. (REUTERS/Regis Duvignau)

If the EU can have a Central Bank president who doesn’t have any central-bank experience, then it’s unsurprising that its previous Commissioner for Competition didn’t believe in competition. Margrethe Vestager has since moved on (she is now Executive Vice President of the European Commission for A Europe Fit for the Digital Age, a title whose pomposity can be measured in terabytes), but one of her most notable attempts at pursuing a protectionist agenda (while in her old job) has now run into difficulties at the hands of the usually docile European Court of Justice (although this verdict can still be appealed).

CNN:

Apple has won its appeal against a European Commission ruling that it owed Ireland €13 billion ($14.9 billion) in taxes.

The European Union’s second highest court ruled Wednesday that the Commission had not proven that the company had received illegal state aid from Ireland through favorable tax agreements.

The European Commission — Europe’s top antitrust authority — said in 2016 that the Irish government had granted Apple an illegal advantage by helping the iPhone maker keep its tax bill artificially low for more than 20 years.

But Ireland didn’t want the money. The small country became the European base for companies such as Apple, Google and Facebook because it has one of the lowest corporate tax rates in Europe. So it teamed up with Apple to fight the Commission….

Apple CEO Tim Cook has previously said the ruling had “no basis in fact or in law,” calling it “obvious targeting of Apple.”

The Irish government also welcomed the decision, saying it had never provided special treatment to Apple.

“The correct amount of Irish tax was charged taxation in line with normal Irish taxation rules,” the finance ministry said in a statement.

It’s not often that I agree with Cook on anything remotely connected with politics, but on this occasion he is right. Vestager’s move against Ireland was, in effect, a two-pronged attack on competition. It was a part of a broader EU attack on American tech giants (unable to compete, the EU set out to hobble) and it was also part of the EU’s offensive against the ability of its member-states use tax rates in a way designed to attract international investment, an offensive made all the more attractive by the fact that it suited high-tax France and Germany, the EU’s dominant duo, and hurt some of the union’s smaller states — such as Ireland —which do indeed use lower tax rates as a form of competitive advantage.

Writing in the Spectator, Matthew Lynn:

Ireland was always perfectly happy with Apple’s taxes. It paid what it owed in full. And Apple was quite happy to base itself there, and employ lots of people. And then the EU came along, and tried to redefine that as ‘state aid’ and slapped it with a huge bill. It is hardly the first time that has happened. The Commission has already lost a similar case against Starbucks, and Google is quite rightly appealing against the billions in fines that have been imposed upon it (its lawyers must be smiling this morning).

Whether you happen to approve of big American companies or not isn’t really the point, whatever the EU’s defenders try to maintain. In reality, under the existing treaties, aside from VAT, Ireland is allowed to charge any taxes it wants. If the Commission wants an EU-wide corporate tax it should argue for it, and change the treaties openly. Instead, it has been trying to do it in secret, and with lots of spin, but, as it has just discovered, without any legal basis…

Maybe Apple pays too little tax, and maybe it doesn’t. Likewise, maybe Ireland’s taxes are too low, and maybe they aren’t. It is perfectly fine to have an argument about that. But surely those issues should be debated democratically, and decided by the voters, and not by an unelected commissioner who last time she faced the voters, as leader of Denmark’s Social Liberals, won a staggering 9.5 per cent of the vote (soon after which Vestager was shunted off to Brussels to wage war on tech)?

But the technocrats in Brussels don’t give up easily. We’ll have to see whether the Apple ruling is appealed to the EU’s highest court, but meanwhile it’s worth paying attention to a story that appeared in the Financial Times the other day:

Brussels is planning to pursue low-tax member states over their advantageous corporate tax regimes as pressure mounts on EU policymakers to crack down on sweetheart tax deals in the wake of the Covid-19 crisis.

“Sweetheart deals”: Not for the first time, the wording gives the Financial Times away. Often thought of as the paper of business (and despite some often highly informative reporting), the FT is, in reality a publication of the center-left and is in thrall as well to the dreary pieties of the Davos crowd.

I should add that this new initiative has little or nothing to do with paying for COVID-19. The EU’s tax cartel was busy long before that bad day in Wuhan, and now appears to be ready to open up a new front in the war against ‘unfair’ tax competition.

Back to the FT:

In what would amount to an unprecedented legal assault, the European Commission is exploring ways to trigger an unused treaty instrument to reduce multinationals’ ability to exploit highly advantageous corporate tax schemes. Crucially, unlike ordinary tax legislation in the EU, the initiative would only require the backing of a qualified majority of the EU’s 27 member states rather than unanimous support of all countries, restricting a government’s ability to wield a veto. The measure would also need approval from the European parliament….

Officials told the Financial Times that the plans, under Article 116 of the EU’s treaty, were at a very early stage but would aim to identify certain competitive national tax schemes as distortions of the single market. They are likely to trigger intense controversy among member states, which fiercely protect their taxation powers.

So, competition is a distortion of a single (allegedly competitive) market.

Interesting . . .





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