So Apple may have to pay out around 13 billion euros in back taxes. The company is objecting. The US is furious. Is Apple a victim of an EU that treats foreign companies differently, or does the US tech deserve its treatment – an example of all that is wrong with globalisation?
The EU and US-techs don’t have a good track record. From anti-trust disputes with Microsoft, right up to a row that broke out in the last few days between the EU and news aggregators, such as Alphabet’s Google News and Facebook, many feel that the EU has had an anti US-tech agenda.
On the other hand, some European companies claim that they have not always been treated fairly by the US – take B(British)P for example, or HSBC.
The case against Apple is obvious. The world’s largest company by both profits and market cap, does not pay its fair share of tax. It’s a popular idea, and outside of the business world, few would disagree. Within the business world, not that many would disagree either.
Then again, Apple is merely deferring tax, or so goes the argument, and the tax that the EU wants is, in fact, a tax on Apple’s intellectual property – and thus due to the US, not a European country. One day, continues the argument, this tax will indeed be paid to the US, and the EU is in effect robbing Uncle Sam of its dues.
Apple itself argues that its tax arrangements in Ireland have been in place since the early 1990s, and that they were agreed at a time when Apple was struggling for its very survival, so it most certainly did not choose to operate in the Emerald Isle to save tax, and that the EU is trying to re-write history.
This is also being presented as a row over sovereignty. Is the EU really right to tell the Irish government what it can and cannot charge in taxation?
Against that last point, the EU argues that Ireland is effectively offering state aid to Apple, furnishing it with tax arrangements that are not available to other companies – expressly against the ideals of the single market.
The US, by contrast, claims that the EU’s claim against Apple have no precedent – that to show that Apple is receiving unfair tax subsidies it has to show that a tax arrangement is both selective and advantageous. A white paper produced by the US Treasury suggested that that the EU has to show that rival companies are adversely affected by arrangements between the Irish government and Apple – but which companies, precisely, are affected? Apple does not appear to have serious European rivals?
Opportunity for the UK
Some say that, in this post-Brexit era, an opportunity emerges for the UK, which, once it leaves the EU – assuming that day will dawn, will be free to make whatever tax arrangements it so chooses. Against that, that the EU may impose rules which affect UK companies, just as critics say it has done with US firms.
Others suggest that the EU is inherently protectionist, that it imposes trade barriers against non-EU countries via the back-door. Although, in this regard, the US is not without fault.
But are we entering an era when anti-free trade sentiments come to dominate? The pending trade agreement between the US and EU – so called, TTIP – has hit trouble, with both German and French people in authority suggesting that negotiations have hit insurmountable barriers.
But the row between Apple and the EU comes at a time when the US election is being fought between two candidates who advance anti-trade rhetoric. The EU/Apple/US dispute adds to tensions.
It often seems to be human nature, when acting in a crowd, to react to adverse circumstances by making things worse. In the 1930s, the US reacted to the early stages of The Great Depression with the Smoot–Hawley Tariff Act – imposing tariffs on 20,000 imported goods. There is a common view amongst Economists that this Act made the depression a lot more severe.
We are seeing a backlash against capitalism – we are seeing it represented in the US election season, we saw it in the motivation behind many who voted Brexit, we are seeing it in the rise of political extremism worldwide.
But reversing moves towards global free trade will solve nothing, and create many new problems. Indeed, a good case can be made for saying international trade facilitates international peace – as a general rule trading partners do not wage war on each other.
But then there is the issue of the growing corporate cash pile, a sense that some companies are becoming too powerful and take steps to avoid corporation tax worldwide. Some say, the answer it to abolish corporate tax altogether, is that right? Read on.