|Margrethe Vestager, EU Competition Commissioner |
The field of international tax planning was specialized, complex, cloistered, and quiet---until the European Commission ruled on Tuesday that Apple has to pay €13 billion ($14.5 billion) in back taxes to Ireland. Tax-the-corporations crusaders "hooted with delight
" and seemingly didn't care about the methods used to arrive at the result. The overwhelming majority who adhere to the rule of law--whether the law cuts for or against their preferences--saw the danger.
"The commission concluded that Irish rulings in 1991 and 2007 artificially lowered the tax Apple was due to pay, and that although the firm did not break any law, this arrangement was in breach of EU state-aid rules preventing member states from offering preferential treatment to particular firms."
Normally laws trump "rules" in the hierarchy of legal authority, but not, apparently, when the laws of the sovereign state of Ireland are measured against the rules of the European Commission.
The Wall Street Journal
For a quarter-century, Apple relied on agreements from Irish authorities that all of a sudden are adjudged to have provided it with billions of dollars in what the EU has now ruled to be illegal state aid.
There's no question that Apple and other multinational corporations take advantage of inconsistencies between tax jurisdictions ("tax arbitrage"
). To achieve significant tax reduction under the law, however, multinationals must have employees and other attributes of a "real business" in low-tax countries, hence explaining why Dublin is a boomtown.
Apple CEO Tim Cook: "Total political crap
Quite apart from the merits of its case, the European Commission ruling can be viewed as an attempt to reassert its authority (and finances) after Brexit
. However, the blowback may have been stronger than they had anticipated.
Apple's EU tax ruling has sparked talk of an 'Ir-exit'
. Other European countries are watching and weighing the benefits of staying in the union.
Apple, as well as other multinationals like McDonald's and Amazon, will contest the judgment for years. Meanwhile, they have also begun moving some operations out of the Eurozone to reduce exposure to EC rulings. We are seeing either the resuscitation of the European experiment or the beginning of its end. If I had to bet, it would be on the latter.