Why The EU's €13bn Apple-Tax Is "Total Political Crap"

07/09/2016 13:19

Tim Cook, the CEO of Apple, would have hoped to deal with just two announcements this summer: the unveiling of the iPhone 7 and the rumoured launch of a new Apple Watch. But, last week the EU decided to add a third announcement to the tech giant's summer line-up: a retroactive €13 billion tax bill.

The European Commission said the bill was being sent to the company because, according to the Commission's investigation, it benefited from a quarter of a century of illegal state support from Irish authorities, who allowed Apple to operate at a tax rate of one per cent.

Michael Noonan, the Irish Minister for Finance, pointed out that EU treaties dictate that member states have sovereign control over tax policy, before accusing the Commission of trying to extend its influence "through the back door".

Tim Cook also hit back at the Commission in an interview with the Irish Independent, describing the decision of the competition overseers, rather more concisely, as "total political crap".

And Cook is right. The Commission is not acting in the interest of Irish taxpayers, nor is it attempting to preserve competition on the continent. The Commission is trying to give Berlin an upper-hand.

The German capital is the country's' tech hub, housing a number of smaller startups, such as the automotive company unu, and established names like SoundCloud and Uber. Germany has a lot riding on the future success of these techie entrepreneurs: sums like the €2.4 billion in venture capital earned by Berlin startups last year, the thousands of jobs created by the cities' 2500 tech startups and the tax returns those jobs yield.

Yet, Berlin's startup superstars are still lagging way behind their Silicon Valley counterparts. Only one German tech company, the software firm SAP, features among the top 25 tech firms on Forbes' Global 2000 list. US tech companies, on the other hand, dominate the list, with seven holding spots in the top ten. Translate this into finances, and you find that Silicon Valley is generating ten times more venture capital than Silicon Allee - as the Berlin tech-scene has been dubbed.

The picture is bleak for Berlin. It's being battered by tech firms from the States at the beginning of a wider economic showdown between the EU and the US. So, in the spirit of competition, the Commission is not encouraging Germany to adapt by, say, lowering taxation to the levels enjoyed in Silicon Valley - a move that would encourage expansion and investment. No, the Commission has instead opted to play the role of international taxman, taking money from Berlin's biggest US rival - in contravention of EU treaty rules - under the pretence of preserving a competitive environment on the continent.

But, if the Commission is really so concerned with preserving a level battlefield for businesses, how has Germany managed to get away with offering startups subsidies, such as cheap loans from the state bank? They've got off scot-free because the Commission doesn't care about fostering a competitive environment, it just wants to protect the EU's biggest economy from external innovation by deterring US investment. And that is precisely what their Apple tax bill will do.

However, it will not be Berlin or the bureaucrats of Brussels, but taxpayers across the rest of Europe, that will face the brunt of any backlash should the bill get past the appeals of Apple and Ireland. In an open-letter to Europe, Tim Cook said that, although Apple plans to continue investing in Ireland, future "investment and job creation" in Europe - where Apple claim they "create and sustain" some 1.5 million jobs - would be harmed by the Commission's ruling.

The Irish government now has to defend the interests of both its largest taxpayer and European workers in its dealings with the Commission. They should take the advice of Ryanair CEO Michael O'Leary: "Frankly the Irish government should turn around - they shouldn't even appeal the decision - they should just write a letter to Europe and tell them politely to f**k off."


UK Apple