Tuesday, August 30, 2016

Bad Apple?

So, I read that the EU Commission has finally caught up with the shenanigans Apple and the Irish Government have been up to. A ruling today has declared that the tax advantages given to Apple by the Irish are illegal and have been for some years, meaning that back tax (and interest) is due to the tune of £11 billion (that's some tax bill!)

Of course those of us familiar with the workings of American corporations already know this dubious practice has been going on for years; certainly since the 80s (to my knowledge) Company after company has come and gone and used deliberately weak tax regimes like Ireland as bases to route cash and therefore more profit back to the good'ole US of A. The list is long, Google, Dell, HP, Intel, Facebook, Pfizer all take advantage of this ploy. Today there are something like 700+ US companies based there. They call it tax "avoidance" rather than "evasion" since up until now all of the parties involved had assumed that the practice was legal. Places like Co Galway and Cork have long been convenient European bridge-heads for US companies wanting to make a quick (low-tax) buck and for the Irish Government to "buy" investment and jobs into areas of under-employment and under-development, a win-win for both parties. 

Companies (especially the larger ones) will always look for ways to reduce their tax burden but those (for reasons of scale) who are excluded from such schemes have for a long time now complained that they are inherently unfair, some have gone as far as to accuse Ireland of being the "tax-scam" capital of Europe. This is perhaps a little harsh since there are a few countries doing similar things, and let's face it, companies in the financial sector around Europe are hardly spotless when it comes to manipulating markets for their own gain. However, I believe there is a grain of truth here, what smaller (more agile) businesses really want is for Governments to provide a fair and level playing field, they want this in order to both attract talent but also compete on price with larger entities. If one company is paying 0.005% corporation tax in one EU country but another elsewhere is paying the full 20% then clearly this represents an unfair advantage.

Overall I'm glad this blatant loop-hole seems to be on it's way out; perhaps fairer competition will see better price competition and more choice for consumers. Apple has for a long time been philosophically anti-competitive, both from a product point of view (try buying a non-Apple power cable for your phone!) but also, it seems, from a tax standpoint too.

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