What's Next After The EU's Apple Ruling?

05/09/2016 14:45 | Updated 05 September 2016

Credit: Pixabay

Campaigners for greater transparency and justice in international trade and taxation don't often have much to celebrate, but the news that the Transnational Trade and Investment Partnership (TTIP) talks look to be floundering, and the EU's imposition of a €13 billion tax bill on Apple, should be seen important victories with wide ranging ramifications.

In the latter of these two cases an EU investigation has found that between 2004 and 2014 technology giant Apple benefited unfairly from a sweetheart deal with the Irish government which allowed it to largely avoid paying taxes on profits generated outside the US. According to the EU competition commissioner Margrethe Vestager, Apple, whose non-US operations are headquartered in Ireland, should have paid Ireland's corporate tax rate of 12.5% on its overseas sales, but found that the company paid less than 2% tax on these profits. The Commission argued that the super-low tax rate came about as a result of direct negotiations between the US multinational and the Irish revenue service about how much the company should be taxed, and that this was in breach of competition rules because the rates applied only to Apple and could be construed as state aid. Surprisingly, Dublin shot back and declared it would appeal the Commission's ruling - essentially refusing to collect a sum that is equal to one year's worth of health spending.

While the ruling raises interesting questions about where taxes of multinationals should be levied: in the country of sale, as Ireland argues, or in the country in which the company is headquartered, as the Commission's ruling avers, it is not on these finer points that opposition to the ruling turns. Rather, US trade officials right up to the Secretary of the Treasury, Jack Lew, are protesting the decision on the facile and factually inaccurate grounds that the EU is targeting US companies for political reasons. For its part, the Commission contends that the ruling is not political and it is merely applying the law as it has done against numerous European companies in the past.

Indeed, Vestager levied a €2.9 billion fine on six of Europe's largest truck makers which stand accused of price collusion and delaying the introduction of new emissions technology. Similarly, the Commissioner has also ruled against Belgium's system of corporate tax breaks, which the EU found to be anti-competitive. If anything, Vestager has proven herself to be intrepid in her pursuit of cases no matter what the political pressures against her may be, going after Russian energy company Gazprom for allegedly inflating prices, at a time when relations between the EU and Russia remain tense.

Accusations of political motivations aside, the sight of the Irish and US governments lining up to support Apple to the detriment of ordinary taxpayers speaks volumes about the ideological mind-set shared by the corporate and government elite. The thinking in such neoliberal circles is that the soft touch regulation of big companies spurs more investment and that bigger returns for shareholders will eventually trickle down into the real economy. But as has become abundantly clear through the release of the Panama Papers and the Lux Leaks scandal, a huge amount of the wealth created at the top never does trickle down but gets siphoned off along the way and ends up in offshore tax havens. If the EU can hold-out against the appeal due to be launched by both Apple and the Irish government and force the latter to collect the €13 billion it would come as some succour to a beleaguered citizenry to know that there is at least one major institution out there that is fighting on its behalf.

However, one would be very much mistaken to think that the European Commission is abandoning its neoliberal ways. The EU's executive is still pushing hard for the Transatlantic Trade and Investment Partnership (TTIP) even though opposition to one of its most despised provisions, the Investor State Dispute Settlement (ISDS) clause, has been so intense that it could scupper the deal altogether. Thanks to work by a broad campaign opposing TTIP, the shadowy world of ISDS has been brought to light. Originally devised as a way of protecting the profits of companies who might, for example, lose their assets or have their operations unfairly disrupted by a government reneging on its contracts, it has since become an industry in itself, spawning legions of lawyers specialised in bringing cases against governments on behalf of corporations for such ethically dubious reasons as passing tougher environmental legislation or banning tobacco advertising. An investigation by Buzzfeed into the misuse of ISDS highlights one case in which factory owners in Nicaragua, accused of poisoning a village's water supply with lead were able to get the charges dropped by way of an ISDS, and another in which an Emirati real estate mogul, convicted of swindling the Egyptian people out of hundreds of millions of dollars, had his prison sentence overturned after his lawyers successfully appealed the ruling in an ISDS court. Or consider the case of Veolia, a French waste and water services provider, who is suing Lithuania for $100 million in lost profits after gas subsidies were scrapped by the government. The action came just six months after a local investigation uncovered that Veolia had used mob-like practices and violence to win contracts in Vilnius and is further evidence of how ISDS cases are being used to intimidate governments into backing away from prosecuting companies for malfeasance.

If the Apple ruling signifies a small step in the right direction, the Commission's continued support for ISDS proves that there is still a long way to go before the rights of citizens are as respected as the rights of corporations.