Apples, Enda and the EU.

Michael Noonan (Irish Finance Minister) meets Margrethe Vestager (European Competition Commissioner) in 2013, Dublin Castle.

It is all over the national and international news, my social media feeds, and every commenter and politician wants to have their say.

I can’t help but see some signs of people missing the realpolitik, everyone (even the average joe soap commenters) is out for themselves.

First Apple, they are in the most simple position. They made a deal with the Irish government in 1991 and 2007. Essentially Apple wants what any good corporate entity wants, comparative advantage. The board of Apple has a duty to maximise profits to their shareholders. This is how capitalism is supposed to work. And if that means avoiding tax by whatever means, so be it.

In theory this allows capitalist based economies to provide the best services to all the people based on fair competition. In practice it gives the biggest corporations power to influence small governments into making the playing field less than fair.

Thus we have the reason d’etre for the competition commissioner, Margrethe Vestager. ‘The EU’ of this case, the competition commissioner has a duty to ensure fair competition across the common market.

This has to be a tough job. Vying with both national and corporate interests. But it is also one which every country in the EU agrees is necessary. Adam Smith’s ‘The Wealth of Nations’, upon which a lot of our capitalism is based, explicitly warns about the formation of monopolies and fears that capitalists will pursue profit at the expense of the common good.

This is why we all agree that we need a powerful competition commissioner. Beyond just the EU, her powers extend over the EEA (which currently includes Norway and Iceland, formerly included Switzerland, and likely will include the UK if they ever manage to leave the EU). And what has she said?

Basically, the tax deal Apple cut with Ireland is unfair to all the small and medium companies who can’t compete with Apple. And not just in Ireland, if this was an Irish only problem we might have a reason to ask why is the EU getting involved. Apple has declared all the European profits as going through Ireland, thus across Europe, for a full decade, Apple has been operating with an unfair advantage. Against every small and medium sized businesses who can’t get the same deal out of the Irish government.

Now how much of this is propaganda to cover a power grab over Irish taxation and how much is a system working the way it should? I will discuss that later. But first…

In comes Enda Kenny, saying he will appeal this decision. What are his motivations? Well fundamentally Enda and his FG party are pro-business. And they feel the Ireland Inc has benefited hugely from these kinds of tax deals. Microsoft, Facebook, and Google all have their European Headquarters in Dublin, and Apple supposedly has theirs in Cork.

Enda wants to protect this reputation, that Ireland is a good place to do your business because we’re just corrupt enough to let you get away with shit like this. You will note, it wasn’t Enda Kenny’s government who made this deal. Bertie Ahern was still in power when Apples started avoiding tax in this way. FF and FG are both lock in step with each other on this. They both believe it is in the best interests of Ireland.

The official position:

“Ireland’s position remains that the full amount of tax was paid in this case and no State aid was provided. Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers.”

Minister Noonan goes on to cite sovereignty, international consensus and the US treasury as reasons to appeal this EU commissioners decision. Basically saying, it’s always been this way, we don’t want to rock the boat, we’ve got a good thing going, and the US doesn’t like it when you target US multinationals bringing their money back home, and playing the National Sovereignty card.

Lets be clear, when we talk about sovereignty here, Michael Noonan is saying, we don’t want our credibility to make personalised deals with US multinationals to be damaged by the requirements of being in a common market.

Finally, what are the people saying?

You get comments like this :

“we (the protestors) Ignore Europe on water charges but embrace on this!!?? I have never nor do i ever want Europe to be telling us how to run our country!”

In the defence of Nationalism, people see everything that the EU does as a threat to their nation. Their sovereignty. Even when it is agreed, by the member states that they are a citizen of, that we need a Competition Commissioner — the defence of sovereignty is used whenever the government wants to win over these nationalists.

It is not at all surprising that you would agree with the EU on some things and disagree on others. So what you are revealing about yourself when you make comments like this, or sympathise with them, is that you care more about your tribal identification with Ireland (and maybe not the Ireland inc. that the current government envisages but some idealised version of Ireland).

So here we have everyone, you can see their motivations based on what they are saying. Enda Kenny and Michael Noonan was to see Ireland’s reputation as a business friendly place to invest protected. Margrethe Vestager wants to keep large multinationals from abusing their power and have a market with fair competition. Apple wants to avoid paying tax on as much of their profits as they can. And Irish people want to protect an imagined version of Ireland from Corporate multinationals and sovereignty eroding European institutions.

Everyone is acting exactly as the should — as we should expect them to act. If you don’t want a pro-corporate government in Ireland, stop voting for one. If you don’t want to be part of a globalised world, find an alternative for yourself, go off the grid, live in a commune, because globalisation — in many different forms — is here to stay.

  • ”According to Adam Smith, markets and trade are, in principle, good things — provided there is competition and a regulatory framework that prevents ruthless selfishness, greed and rapacity from leading to socially harmful outcomes. But competition and market regulations are always in danger of being undermined and circumnavigated, giving way to monopolies that are very comfortable and highly profitable to monopolists and may spell great trouble for many people.” (see: http://cje.oxfordjournals.org/content/early/2015/03/12/cje.bev011 )
  • I promised i’d talk about EU power grabs, and then I didn’t. 
    This is indeed an unprecedented use of power by the European Commission. In a time when we know that many companies are avoiding paying tax altogether, there is a strong political will to act, and this is one of the most powerful women on the planet doing just that. (The EU/EEA accounts for more GDP than any single nation, and over 450 million people. As such decisions made here affect more wealth than a similar decision made in the US or China) I would say, yes, this is a power grab, but it is also mostly acting against Corporate power, not National power. The damage to Irish sovereignty is minimal, and we will see how, in the courts rule on this to resolve the legal nightmare that this power grab entails.
  • Finally, what is a double Irish with Dutch sandwich, more details in the link, but the simple version is — You can claim that a different corporation (which you also setup) is owed royalties, and because you pay out a huge amount in royalties, your profits are much smaller. Because corporate tax is paid on those profits, now you have a much smaller tax bill. That is how you can end up with US iphone profits re-directed to Ireland. But there is more, when Ireland lets you do a similar deal, redirecting profits from this entity to Holland and back again, but the return to Ireland is to a separate company — and this is the kicker — Ireland doesn’t tax the profits for companies domiciled in Ireland, but registered in over seas tax havens. So you can end up paying almost nothing. (The Dutch don’t tax income attributable to a foreign business so the Irish don’t see all the money landing on our shores, it is declared in Holland where it isn’t taxed at all).