EU Fight For Tax Fairness Opposed By Ireland And US

Antitrust enforcement has been a lot stronger in the EU than here in the United States over the last couple of decades. Of course, many believe that EU enforcement has been a little too focused on foreign-owned business (see Microsoft and Google) but at least they have taken some action to reduce the power of these virtual monopolies. Today, the European Commission order Apple to pay nearly $15 billion in back taxes due to illegal tax incentives offered the company by Ireland. The Commission has recently been focusing on corporate tax-avoidance via tax deals countries strike with multinational corporations. It has already gone after Starbucks in the Netherlands, Amazon in Luxembourg, and Anheuser Busch-InBev in Belgium. All of these companies have received favorable tax treatment from the country in question. All these countries are offering these sweetheart tax deals primarily in the hopes of bringing additional foreign investment into their country. But most of the time, these large multinationals barely have a presence in these countries and just move profits into country to pay a far reduced tax rate. In Apple’s case, the “so-called head office [in Ireland] had no employees, no premises, no real activities,” according to Margrethe Verstager, the competition chief of the Commission. But, by being “located” in Ireland, they were able to reduce their tax on European profits to 0.005%, saving over 50 euros for 1 million in profits.

These tax deals for multinationals actually provide them with an unfair advantage over other, smaller firms who do not have access to these special deals. They also essentially rob other EU countries of tax revenue that should rightfully belong to them. Considering the trouble that Ireland has had after the financial crisis, you would thing that they would only be too happy to receive an extra $14 or $15 billion. And you would think that the US would be happy that someone is trying to enforce tax fairness, perhaps making the repatriation of the profits of the US companies slightly more attractive. But, of course, you would be wrong. Ireland has vowed to appeal this decision on the grounds that they need “to defend the integrity of our tax system.” They can’t have other companies taking advantage of these sweetheart tax deals getting cold feet, whatever the cost to their own citizens. And a US Treasury spokesman said the decision would “undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU.” Yes, we can’t have anyone trying to crack down on these US-based multinationals companies. We can see pretty clearly where the priorities of government lies and it is clearly not with their own tax-paying public.