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The Real Reason Why UK Tories Are Against EU Tax Probes


Despite their claims to be leading the global fight against tax avoidance, British Conservatives have been vociferous in their condemnation of EU attempts to combat tax dodging. Yesterday, Osborne criticised both Labour and the SNP's referral of HMRC's deal with Google to the EU's Competition Commissioner, Margrethe Vestager. This followed criticism by Boris Johnson of Vestager's verdict, released last week, that Apple's deal with Irish tax authorities was unfair. Vestager's decision is likely to force the multinational to pay back millions of euros to the Irish government.

Osborne's government has resisted virtually every attempt to tighten up tax rules across Europe, not least by leading a move to subvert attempts to share more information about sweetheart tax deals between tax administrations. Simultaneously, Johnson has suggested that the EU is here on some kind of megalomaniac power grab, intent on imposing uniform tax rates across Europe.

The reality of what is happening in Brussels is very different. Despite what Johnson misleadingly suggests, the European Apple case - just like the Google case- has got nothing to do with headline corporate tax rates. Instead it concerns whether a very small number of corporate giants are able to rip us all off, and gain a competitive advantage in the process. For as long as governments are tempted to offer these kinds of sweetheart deals to a small number of companies, the so-called European 'single market', based on fair competition between companies, is a joke.

What the European Commission objected to with Apple was a special tax deal being given to certain companies; the kind of deal that ordinary, smaller businesses simply can't access. Apple seem to accept that they have paid about 2% tax annually in Ireland, when the headline corporate tax rate is 12.5%. That reduction could have been legitimate; if, for instance, they used tax breaks open to all similar companies. But the evidence gathered by the European Commission suggested that Irish officials reverse engineered a tax deal specifically for Apple, revising their calculations down to the amount of tax that Apple would 'accept'. Recently released information about tax disputes in the UK suggests that kind of post-hoc rationalisation applies here too, with HMRC apparently accepting company and individual 'offers' around half of the time.

Sweetheart deals, whether struck in advance of tax demands (so-called 'tax rulings') or after them ('settlements'), are simply not open to the vast bulk of companies. You can hardly imagine a small businessman or woman negotiating with the tax man in this way; yet, that is what both Apple and the Irish tax authorities, and Google and HMRC, may have done.

If the European Commission wins the Apple case, the big winners will not be Brussels bureaucrats. Instead, the winners will be Irish taxpayers- to whom the unpaid taxes will be refunded- plus those smaller IT outfits which simply can't compete with giants like Apple by striking these kinds of sweetheart deals. If British Conservatives really have nothing to hide over the Google deal, they should welcome the chance a European Commission investigation would give to clear their name.

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