1 Infinite Loop, Cupertino (by yours truly)

Apple’s Taxes vs. Jobs Argument Is Not The One Corporations Usually Make

The European Commission’s fine of €13 Bn shakes up corporate taxation concerns—but not in a good way.

In an unprecedented move, the EC has issued that Apple should pay back billions of euros in back taxes to Ireland under laws that never existed. Not because Apple exploited loopholes to avoid paying taxes, but because the EC investigation has, essentially, decided it thinks Ireland’s tax laws are inappropriate.

Apple has responded with a public letter in which it argues that this precedent could have negative consequences for businesses growing jobs in Ireland, and the E.U. as a whole. So, what’s going on?

First, the European Commission didn’t issue this unprecedented fine just because Apple is “a bad corporate citizen” — it knows that singling out Apple gets this much more publicity, and it knows that to Apple, €13 billion is a payable amount. In other words, the EC knows the media will quickly remind people “Apple can pay easily,” putting public mindset against the company because now they just look greedy if they fight this.

But don’t be fooled by clickbait headlines that frame Apple’s argument as “taxes or jobs: you can’t have both”, which is partisan nonsense not based in economic fact. It’s also simply not Apple’s argument, nor Ireland’s Minister of Finance’s argument for that matter.

Apple had a tax arrangement in Ireland, like numerous other businesses and corporations do as well, that was established in the 1980's. This was fortuitous for Apple, who had a not so great run from the mid-80's to the early 2000's, and for Ireland, who needed to attract businesses and generate jobs.

What the EC investigation’s ruling says, basically, is that those completely legal (and fairly common) arrangements are insufficient, in its eyes, so now Apple has to pay back taxes as if Ireland had a different set of laws all along. In other words: Ireland’s sovereignty as a nation in charge of its own laws was just overruled by an intra-government's report, which is why Ireland is siding with Apple on this matter and fighting the ruling.

Now, it’s important to note that both Apple and the EC have valid points. Apple warns that such EC oversight has a chilling effect on businesses, who now may face effectively-random fines of severe proportions, despite conducting business in a completely legal manner. That should give any business owner pause.

But the EC’s point is valid, too: a tax rate that is effectively less than 1% for a corporation reaping billions in profits each quarter isn’t a healthy or sustainable way for governments to facilitate the infrastructures that these corporations depend on. Taxes uphold our society in countless ways, and do much more for the public good and the public’s interests than any one corporation ever could. Giant profits generally benefit only the 1% of people; same with increases in shareholder value, when those increases come at the cost of erosion from the bottom.

Apple defends its position with the claim that they are pro-tax reform, but they want a tax reform that institutes changes going forward, not retroactively. In that, I agree with them completely. But rather than spend too much time and energy on a court battle over this EC fine, I hope we get transparency — from all parties involved — into such a tax reform effort.

If the public side of this dispute remains one of a legal battle between Apple and the European Commission, and not one about comprehensive corporate tax reform in the EU, we all lose out from what could have been a fruitful trigger moment.