Apple Tax: Why the Ruling Was Correct

After the recent Apple tax ruling, Megan Fanning looks at why the Irish Government is making the right decision in appealing the European Commission’s ruling[br]THE recent Apple tax ruling by the European Commission is not as straightforward as some would like to believe. Unfortunately, should Ireland have opted to force Apple to pay the apparent thirteen billion owed -- forgetting about interest for the time being -- it would not have gone straight into our pocket. The Government would not be able to invest it in public services such as healthcare, education, or even Dublin Bus. Due to the fiscal treaty referendum voted in four years ago, the money would have to pay off our national debt, which currently stands at €204 billion, as it is a once-off payment.The European Commission reports that Ireland has given a special deal to Apple in order to allow for this tax inversion to happen. Between 2003 and 2014, Apple’s taxes fell from 1% to 0.005% in Ireland. Both Apple and Ireland have denied that any special tax deal was formed and that all dealings were above board.The Minister for Finance, Michael Noonan, announced that Ireland will appeal the judgement. Given the misrepresentation of the report in the media it is understandable that the nation would be outraged by having no say in the matter.However, it will be much better in the long run for our country to appeal the judgement and to keep strong alliances with the multinationals. Cork houses Apple’s European headquarters and employs over 5,500 people and has plans to expand further. If Ireland were to request the €13 billion we would jeopardise this relationship to a point that is beyond repair, costing thousands of jobs and providing a catalyst for many other multinationals to look elsewhere in Europe. As Minister Noonan has stated, Ireland must “provide tax certainty to business.”It is unjust to expect foreign direct investment to come into Europe expecting a legitimate tax arrangement only for that arrangement to change. Then, on top of that, the company would be punished in retrospect for a legal arrangement. Along with that, approximately one in five of all private sector jobs in Ireland are in some way connected to American multinational companies. In 2004, American companies’ profits made up a total of 7.6% of our GDP versus more recent figures showing that this had been quadrupled to 42%. Ireland cannot afford to accept this judgement. Nine out of ten of the top information and communications technology companies; nine out of ten of the top global pharmaceutical companies and nine out of the ten top global software companies all have locations in Ireland and we cannot risk the jobs these companies provide.For five consecutive years, IBM have ranked Ireland number one in its global trends report for our “continued ability to attract high-value investment projects in key areas” and Pricewaterhouse Coopers’ reports that Ireland is the “most effective country in the European Union in which to pay business taxes.”In 2015, Ireland’s GDP grew by 26% - a number not even seen by the likes of China at its peak. Governments, economists, policy makers alike began to ask questions as to how this was possible. Nobel Prize-winning economist, Paul Krugman, coined the term “leprechaun economics” to describe the tax inversion that takes place in Ireland. A company shifts its legal domicile to a low-tax country while keeping its operations in a high-tax country in order to avoid higher rates. This was the case with Apple and Ireland and, while it is morally questionable, it is still legal.So Ireland is going to appeal the judgement. Our Government’s view is that we need to protect our tried-and-tested low corporate tax policy that has attracted an incredible amount of multinational companies such as Apple, Google, Facebook, and more. Perhaps we are a country that is too dependent on multinationals but unfortunately, for the time being, the power is not in our hands. Multinationals provide too many jobs and too much revenue to question the structure. Minister Noonan argues that we must protect our tax system and provide a system that is certain of its structure.Minister Noonan argues for the appeal on two main points. Firstly, that the report is an intrusion onto our sovereignty. We have a sovereign right to control our own fiscal policy, to conduct our tax structure as we wish. Secondly, all acts were in accordance, there was no deals or favours offered to companies and there has been no evidence provided by the Commission for this.This news story is going to go on for many years to come and it will be interesting to see the effect it will have on future tax policy both nationally and on a global scale.