EU Attack on Apple Is a Blatant Power Grab
The European Union is using Apple’s questionable tax arrangements to gain power, not just over American corporations, but in another major step toward becoming a superstate.
On August 30, the EU ordered Ireland to charge Apple €13 billion (us$14.6 billion) of back taxes.
The EU’s choice of target is smart. Corporate tax avoidance is a hot-button issue right now. And Apple’s setup looks pretty dodgy. Ninety percent of Apple’s non-U.S. profits are earned by subsidiaries based in Ireland but are technically not tax resident in any country at all. According to the EU Commission, in 2014 the company’s effective tax rate on its European earnings was 0.005 percent.
But the rights or wrongs of Apple’s tax arrangement have nothing to do with this case. Individual nations determine taxation policy, not the EU. If Ireland wants to offer tech companies a low corporate tax rate in order to encourage them to bring high-paying jobs to Ireland, it is perfectly entitled to do so. Apple has exploited some loopholes in the international taxation system, but the G-20 has already addressed this, and those loopholes are due to be closed by 2018. “Curbing tax gymnastics is a laudable aim,” wrote the Economist. “But the commission is setting about it in the most counterproductive way possible.”
The European Commission is acting “arbitrarily, retroactively and beyond the rule of law,” wrote the Telegraph’s international business editor Ambrose Evans-Pritchard. “What is really going on—as often in EU affairs—is a complex political attack on multiple fronts.”
“Apple’s chief executive, Tim Cook, has a €13 billion ax to grind, but he is almost certainly right in arguing that [EU Competition Commissioner Margrethe] Vestager is making up state aid rules as she goes along, and has yet to produce evidence that Dublin granted Apple a sweetheart deal on taxes,” he continued. Cook said the EU’s attack on Apple “has no basis in fact or in law.”
The EU is now in the absurd position of ordering the Irish government to collect taxes that the government doesn’t think needs to be collected. The EU is “overreaching their competence,” said Irish Finance Minister Michael Noonan. “The European treaties say the individual countries are responsible for taxation policy. This is an approach through the back door to try and influence tax policy through competition law.” Ireland has joined Apple in appealing the case to the European Court of Justice (ecj). It will almost certainly fail: the ecj doesn’t bother with mundane things such as enforcing the law. It always rules in favor of more Europe.
The EU has built an incredibly powerful department in its Competition Directorate, and it is using that muscle in national taxation policies. Evans-Pritchard explained:
Europe’s Competition Directorate commands the shock troops of the EU power structure. Ensconced in its fortress at Place Madou, it can dispatch swat teams on corporate dawn raids across Europe without a search warrant.
It operates outside the normal judicial control that we take for granted in a developed democracy. The U.S. Justice Department could never dream of acting in such a fashion. Known as “DG Comp,” it acts as judge, jury and executioner, and can in effect impose fines large enough to constitute criminal sanctions, but without the due process protection of criminal law.
In attacking taxation policy, the EU is taking an important step toward becoming a superstate. Britain’s centuries-long struggle for power between the king, aristocracy and the commons revolved around taxation. America’s revolution began with “no taxation without representation.” The ability to raise funds from a people is absolutely integral to a nation state. And the EU wants some of that power for itself.
But it wants something else too—it’s jealous of America’s dominance of the IT industry. The entire field is made up of American start-ups and their Far Eastern competitors. Instead of examining why an entrepreneur can found a massive business in his garage in California but rarely in the hyper-regulated EU, the European Commission is attacking U.S. tech firms.
Vestager is investigating Amazon and has said she wants to add Google’s parent company, Alphabet, to her list of targets. Evans-Pritchard wrote:
Behind the shadowboxing is a strong suspicion that powerful forces in the EU are trying to use state aid probes to break the global dominance of America’s technology giants, vainly hoping to nurture its own “Silicon Valley” behind a digital wall. Amazon, Facebook, Google, as well as Apple, are all under fire, and Microsoft has fought an epic battle.
The commission’s targets expose a dangerous anti-American attitude within Europe. As Evans-Pritchard pointed out, Germany’s questionable dealings with Russia’s Gazprom are waved through. “It is almost as if some in Brussels view America as the real enemy,” wrote Evans-Pritchard.
In the wake of Brexit, some analysts expected European officials to take a step back from their repeated attempts to gain more power for the EU. The attack on Apple shows the EU Commission is just as determined as ever to build a superstate—a superstate that controls global commerce.
Trumpet columnist Brad Macdonald warned that “[b]y using its own economic largesse to set global regulations and define global business practices, the EU is steadily gaining the power to transform the global economy.” For more on how the EU is trying to build its own power, read his article “Bending the World to Its Rules.”