EconoMatters, Future of Globalization, Richter Scale, Global Bite

Apple: Is Europe Unfair?

Six points about the EU’s Apple tax ruling.

Credit: Allen www.flickr.com

Takeaways


  • It annoys corporate Washington that the European Commission in Brussels has too much backbone.
  • Reining in big multinationals is a key condition for the future legitimacy of globalization.
  • It is unbecoming for US Treasury Secretary Jack Lew to defend GAFA.
  • Europe is aware of the fact that many former Obama officials have been employed by the GAFA complex.

1. US up in arms

For Apple and (and prospectively the other GAFA companies) now to claim they want more “reliability” regarding EU tax rulings begs disbelief.

With their armies of legal and tax consultants, they have been looking to exploit every imaginable (and unimaginable) tax loophole for years. In the process, they have turned the European tax system into Swiss cheese.

That the European Commission is now striking back has corporate America up in arms. This is a bit like former U.S. Presidential candidate Steve Forbes constantly clamoring for “tax simplification” and the flat tax, ideally by filing annual tax returns on a postcard.

This article was also published in Manager Magazin

What made this suggestion so “rich” is that it came from the head of a family that has made a lifelong sport of finding every tax loophole it can find.

Punching loopholes into the tax code via armies of lobbyists and then complaining about the complexity of the tax system is, at best, disingenuous.

What really annoys corporate Washington and its lobbyists is that the European Commission in Brussels evidently has too much backbone. It doesn’t just fold in front of a powerful lobby.

That makes the European capital very different from the U.S. one. Via the cancer of campaign finance, U.S. corporations and their lobbyists own Washington. They expect Brussels to fit into the same pattern.

2. Reining in MNCs

If globalization is to have any popular support in the future, the big multinationals (for this isn’t just a United States problem) simply cannot go on turning the global tax system into Swiss cheese. Reining them in is a key condition for the future legitimacy of globalization.

This may displease the hordes of lawyers, accountants and others who make a spectacular living out of what is euphemistically called “tax optimization.”

In that effort, the GAFA firms systematically pick on the weak – typically governments without meaningful industrial activity that were nevertheless desperate to attract significant levels of corporate taxes.

The European Commission is now making a deliberate effort to push back on such shenanigans. It basically says that major corporations colluding with all too pliable governments isn’t acceptable European practice.

The Commission is correct. It doesn’t suffice any longer to have more OECD studies and standards calling for more tax fairness. The rubber finally has to meet the road.

True, countries like Ireland, Luxembourg, the UK and the United States — all tax shelter havens (remember Delaware?) — may have to find new ways to make a living.

So what? Consider the case of Switzerland. Its previous precious business license for tax evasion – via its “exclusive” private banks – was also effectively shut down (notably by U.S. enforcement measures).

Keeping the multinationals from endlessly gaming the system is the next step in reining in crass inequities.

3. What’s wrong with Jack Lew?

It is amazing to see how Jacob (Jack) Lew, an otherwise sober and very honorable public servant, has turned himself into a veritable cry baby, advocating on behalf of GAFA. His crying foul just because major U.S. business interests are legitimately affected smacks of a bazaar mentality. It is out of character for him – and generally unbecoming for a sitting U.S. Treasury Secretary.

On many items, he and his predecessors tend to feel responsibility for the global system. This is often a useful exercise, such as on combatting terrorism finance and other abuses of the global financial system.

What is unclear – and left completely unexplained by Mr. Lew – is why this principle of managing to enhance global responsibility apparently only applies if, by and large, the culprits are firms based in other countries.

4. Imperialist U.S.

The U.S. government simply cannot always assume to be the arbiter of the behavior of other nations and their firms (see: foreign banks, VW, terrorism finance) – and at the same time consider itself Scot-free and/or above the law. That ultimately smacks of an imperialist mindset.

The problem is that the U.S. will encounter more resistance on its future initiatives if it factually acts in a manner where U.S. firms are effectively held to lower standards than foreign ones.

5. Is criticizing U.S. firms Anti-Americanism?

The related effort – to try casting people like myself who point out these massive inconsistencies – as advocates of anti-Americanism isn’t just a cheap shot.

It’s actually a sign of despair (and an implicit admission of a lack of good arguments). Intended as a killer argument, it actually achieves the opposite purpose.

It is water on the mills of the categorical opponents of TTIP since such “arguments” underscore why big corporations cannot be trusted.

Ironically, by raising this point, CEOs like Apple’s Tim Cook unintentionally create a self-fulfilling prophecy. These companies will do everything to run away from their responsibility toward the democratic societies out of which they extract the vast plethora of their gargantuan profits.

6. The new Wall Street

Europeans are also painfully aware how many former senior Obama officials (not to mention those from the Clinton machine complex who made the move before them) have already moved over to be employed by the GAFA complex.

Silicon Valley firms have become the “new” Wall Street. After the global financial crisis, moving to the employ of investment banks just isn’t as prestigious and remunerative as it used to be.

But this revolving door stinks from the head if Secretary Lew now effectively turns himself into a one-sided corporate tax advocate. True, he used to be in the employ of Citigroup and learned there how the greasing game works.

But he should hold himself to a higher standard.

Editor’s Note: Partially updated and rounded out on September 1, 2016.

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About Stephan Richter

Stephan Richter, from Berlin, is the publisher and editor-in-chief of The Globalist. [Berlin/Germany]

Responses to “Apple: Is Europe Unfair?”

Archived Comments.

  1. On August 31, 2016 at 2:54 am Global Politics and Law responded with... #

    Don’t you think that the problem isn’t in Apple or Amazon but in the lack of harmonization in the European tax system for companies?

  2. On August 31, 2016 at 3:08 am tini responded with... #

    Courageous and truthful finds – Mr Richter. Expect the corporate wrath – incl hijacked officialdom – to snipe at you – particularly if your truths travel widely. I will thank you by reading your column but they will try to cause you a concocted legal problem and then graciously offer to keep it under the lid if you promise to shut up. At least, that is the preferred corporate way of handling harmful dissent in the US and it works – mostly!

  3. On August 31, 2016 at 5:24 am Nightfalcon responded with... #

    @globalpoliticsandlaw:disqus
    The point is right, but the adressee is wrong: the reaction of the EU commission, which I fully support, IS an powerful harmonization effort. It disciplines effectively EU member states and multinational companies, ergo harmonization works in the EU, however slowly. But politically this puts public pressure on the US administration to do the same in their sphere of control. Probably they are not ready to continue with world wide tax harmonization = closing of tax havens. The core of the truth is: there is a lack of tax justice / harmonization in the US itself which some try to hide.

  4. On August 31, 2016 at 6:36 am 20eric responded with... #

    Should have happened much, much earlier.

  5. On August 31, 2016 at 8:36 am Global Politics and Law responded with... #

    Yes but competition law is not the way to harmonize taxes. It’s unfair if the Comision do it case by case. If the European Union want to do it, the Comision should propose a lowest common denominator… But that a very big change.

  6. On August 31, 2016 at 10:08 am ubott responded with... #

    To start with, I am not a big fan of Apple or its corporate practices. I have lived my life accordingly. Never purchased one single Apple product (can the author say the same?). Second, I am an outspoken opponent of tax inversion. Third, I strongly believe that all tax havens should be shut down and I know that our governments have the ability to do so, but lack the willingness.

    But the EU tax ruling is legally wrong (while morally understandable). Apple struck an enforceable legal tax agreement with the sovereign nation of Ireland. If the agreement can be equated to state-aid, then the Republic of Ireland and it alone is responsible for this violation. Apple and the sovereign Republic of Ireland can be asked to cease and desist (which they already have), but asking Apple for back taxes, which it does not owe, is a gross violation of the rule of law.

    In spite of the EU’s indignation with the content of the agreement struck by the sovereign nation of Ireland and Apple, barring any evidence to the contrary, Apple signed on to this deal in good faith. The sanctity of contract must not be undermined by political ambitions. This case will only serve as a further example of EU overreach that violates the sovereignty of its member states and in doing so undermines trust in the rule of law. The decision sadly reinforces the misgivings of Brexit supporters.

    In any event, the decision will be overturned on appeal by sounder and less political minds.

  7. On August 31, 2016 at 8:16 pm Gregory Alfano responded with... #

    Greetings. Having spent many hours chasing various search parameters in order to educate myself on this Apple/Ireland/EU tax dispute. .. I was drawn to this site by the appearance of rational thought and an honest approach to exploring some of the many aspects that have surfaced as a result of the decision to assess Ireland a thumbs down for allowing Apple special state assistance.
    And I will say I was not disappointed. My thanks to all who contributed to this article. (Mostly Stephan Richter I assume)
    This is what I’ve learned. .. Rare indeed is the happening upon a news story or video byte that contains a content of at least 50% or more of verifiable, fact checked truth. Some are deliberately misleading, while others dither in & out in a convoluted manner, mixing half truths, selective out of context falsehoods, and superficial conjecture as implied facts to substitute for the author’s opinion to support they’re conclusions.
    I found Tim Cook’s reaction to be expected on the face of it. Expected as it was,I found it very unsettling to witness his unhinged fury in faithfully lying about everything he presented as proof that Apple was selectively crusified by a kangaroo court. Having viewed his testimony in defense of Apple in 2013 before Carl Levin & the Senate Committee hearings, I found little discrepancy in his sound byte remarks then,and now. In fact,I have to wonder now,since I didn’t think @ the time to check, if Cook was under oath during testimony. .. that if he was,the man clearly commits perjury in the 1st degree. It’s easy to compare his testimony with verifiable facts to prove he simply lied. .. .. about everything.
    A few more observations. . no matter how many times I see our political leaders blasphemy, double spin,flagrantly spew distorted propaganda, and treasonously sellout the interests of American citizens. .. it still makes me nauseous.
    Lastly, I’m not sure how long yet it will take me to properly assimilate the decision of a few of Ireland’s finest to vigorously appeal the EU committee’s findings. .. if ever… even understanding the perverse Irish logic behind they’re motivation. . Cheers