By Eamon Delaney in the Sunday Business Post, 4 September 2016
It really is chickens coming home to roost, with the EU Commission’s shock announcement that Apple owes up to €13 billion in back taxes. Technically, these monies are to Ireland, but to be ‘shared’ with others.
Again, technically, of course, but assuming the money was real the question is asked, should we stick with our very favourable status as a Foreign Direct Investment (FDI) location and appeal the EU decision? Or should our Government seek the €13 billion it didn’t expect but put its longer-term FDI attraction at risk?
There is much facile talk about ‘Apple getting off from paying taxes, and so others have to pay more.’ But how, exactly, do others pay more for this impressive write-down by a big and influential company, which already pays a huge amount of tax? It is a fallacious equation. It’s not as if the money has been provisioned for, or ear-marked for spending.
Many have been saying ‘look what we could build, if we got this €13b money now (which won’t happen) and not have to share it with other EU states (which won’t happen). Also, for those who seek such a sudden outlay, why do they think the solution to our shortfalls is spending more money, such as with this mythical sum?
It is quite the reverse, in fact. For example, the more money that goes into our health service it seems the more the problems are compounded, by further bloating management and bureaucracy and by reinforcing the vested interests and the work practises of the trade unions and consultants. It is efficiencies we need.
We had billions sloshing around during the high-spending Tiger years and look where it got us. We are still paying for our largesse, with uncompetitive costs, and a welfare culture that has the highest number of households in the EU without an earner. That’s what easy money does for – and a populist political culture to spend it.
Let’s face it. We all know there was a clear reason why we welcomed Apple being in Ireland and why we have a low corporate tax rate. It is the lifeblood of our economy, and if that tax rate needed to be lowered even further, I’m sure we’d probably do it. After all, a former Finance Minister (and visionary) Gerard Sweetman once proposed 0% tax – 0% !- for the Shannon Development zone so as to boost badly needed investment and job creation in the late 1950s and 1960s.
This is how Sweetman (above) and mandarin T.K Whitaker kicked off our long-overdue industrialisation and economic regeneration. Without FDI, we are doomed, and if the EU stops us using tax breaks to bring in multinationals, we may as well follow the Brexiters and leave the meddling Brussels superstructure immediately. Not that we don’t have an over-reliance on FDI but that is another story.
But the other big question is: what gives the EU legitimacy in this area? It has no compliance in a member state’s tax affairs, and especially not on a retrospective basis.
This is an attempt by the Commission to get hold of power over tax policy (which it does not have) by influencing the rules setting. The Government is thus right to appeal as it is tax harmonisation by the back door (or risks becoming so). To that end, it plays to the over centralised anti EU narrative held by the Brexit advocates.
In reality we should let Apple keep their tax and stay in Ireland and continue providing tens of thousands of jobs, along with other MNCs. This tax deal dates from 1991, so it’s not as if we can much about it now – and nor should the EU be able to. Indeed, the audacity of the EU’s retrospective over-reach is amazing – this deal was arranged legitimately and in good faith before the Maastricht Treaty!
‘Tax rulings as such are perfectly legal’ say the EU Commission. ‘They are comfort letters issued by tax authorities to give a company clarity on how its corporate tax will be calculated or on the use of special tax provisions.’ But what value has such a ruling if it can be retrospectively and completely overturned like this?
Finance Minister Noonan is thus right to put the long-term security of our relationship with foreign investors before the short-term benefit of getting an alleged €13 billion from them – even if he takes political flak for it.
Also, in ruling that Apple should pay back taxes in excess of 7% of our national debt, Commissioner Vestager has crudely intervened in Ireland’s tax affairs to address an issue that has already been fixed.
The reality is that yes, Apple have got an outrageously favourable deal, starting back in the 1990s, but they are still the biggest tax payer in Ireland and a hugely important part of our economy, along with other MNCs. In a post-industrial Europe, our favourable tax conditions are our key calling card and salvation in terms of job creation.
The meddling EU do not like it, and that is why we must fight and nail to protect it. If we were able to not surrender on it during the bailout negotiations, when Merkel and Sarkozy tried to arm twist the Government and get our tax laws changed as a condition, then there is no reason why should be surrender now.