The number caught everyone by surprise. The announcement by the European Commission on Tuesday that Apple owes Ireland €13 billion in back taxes (plus interest) astonished the waiting political world, prepped on recent rumours to expect a not-gargantuan sum.
It is not clear whether the rumours were spin or spoof; either way they were wrong. The commission didn’t pussyfoot around – it went the whole hog.
A finding that Ireland gave Apple a special deal on its taxes was entirely expected, but dealing with a potential windfall of that magnitude changed the anticipated context immediately.
At least one Minister, to the direct knowledge of The Irish Times, met the news with a loud expletive. The number also greatly complicated the politics.
Minister for Finance Michael Noonan has long since said the Government would appeal an adverse finding by the commission on Apple's tax arrangements. That was one thing when everyone thought the bill would be a few hundred million, or – at most – a few billion euro.
But the prospect of a windfall of €13 billion was another matter. Suddenly launching a major legal and political initiative with the intention of rejecting the money was a less straightforward narrative. Shortly after Ireland had to explain the “leprechaun economics” of a 25 per cent growth in GDP to the world, now it had to explain why it was strenuously seeking to avoid the largest tax windfall in history. More than one commentator liked it to winning the lottery and not bothering to pick up the winnings.
The Independent Alliance went into conclave, conspicuously unable to agree with Fine Gael’s intention to appeal. If the Alliance cannot agree to the appeal at this morning’s Cabinet meeting, then this Government is probably over, sooner rather than later. If they can’t agree this, you wouldn’t give them much chance of agreeing a budget, and a government that can’t budget can’t govern.
Predictable
The cacophony of demands to grab the cash and spend it was entirely predictable.
People Before Profit TD Richard Boyd Barrett raged that the”entire political establishment have colluded over many years with Apple in an act of economic treason to rob the Irish public of €13 billion or more in desperately needed cash for public housing, the health service and other vital public services.”
Sinn Féin has been waiting with some relish for the EU verdict and leaped into action. "Give us back our money," demanded MEP Matt Carthy. For good measure, Sinn Féin finance spokesman Pearse Doherty also called for a public inquiry into Apple's tax arrangements.
The best can be said of all this is that at least the people doing it know its just political grandstanding. Well, this is one of the luxuries of Opposition.
For all that, even a cursory reading of the commission’s findings demonstrate that it is clear that Apple – like other multinationals presumably – has constructed a series of contrived structures designed to pay as little tax as possible. All the tech giant’s platitudes about paying the tax it owes are simply public relations guff. They are not meant to be taken seriously except by the gullible. The point at issue is not whether Apple has these structures, it is whether they constituted illegal State aid or not. That will now be decided in the European courts.
But the sort of hocus pocus that allows Apple to pay – by the commission’s calculations – less than 1 per cent tax on its global profits is under growing scrutiny everywhere. It is increasingly one of the great political issues of the age, even if it is confined to the margins of political debate in Ireland by the national shibboleth of the 12.5 per cent corporation tax rate.
The OECD’s base erosion and profit shifting process is designed to produce international consensus on reducing tax avoidance, but it moves slowly, as such process inevitably do. It is likely that corporations will pay more tax in the future. How and where is another matter.
Nonetheless, it may be that the commission has bitten off more than it can chew with this one. It’s hard to argue with Apple’s summary that it is now being “being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid”.
It certainly seems like an extension of the commission’s powers into the realm of taxation, which the member states of the EU have repeatedly declined to grant.
International movement
Nonetheless, the commission’s move is part of an international movement. If it doesn’t win this one, it has fired a warning shot across the bows of the Apples of the world. National governments may be afraid of multinationals or susceptible to lobbying. The European Commission apparently is not.
The furious debate thrown up by the decision exposes again one of the principal fault lines of Irish politics – between the (roughly) two-thirds of voters who vote for mainstream, centrist parties and Independents, who feel they have a stake in the country and its prosperity on the one hand, and those who vote for parties of the radical left, anti-establishment Independents and Sinn Féin on the other, who feel the State often conspires against them, and that politics ignores those like them. Political debate is between these two sides; but political and electoral competition is more usually within them.
But Tuesday's ruling also exposes another cleavage, too. It forces the State to choose between two of the pillars of its policies for the past 40 years: loyalty to the EU institutions and openness to multinational investors. That these choices are now forced upon an Irish Government shows how much the world has changed. There are no reasons to expect that process is at an end.