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Friday 21 October 2016

Apple verdict is a complete game-changer in Brussels

Opinion: Downing on politics

Published 07/09/2016 | 02:30

Appealing decision: Finance Minister Michael Noonan. Photo: Bloomberg
Appealing decision: Finance Minister Michael Noonan. Photo: Bloomberg

Throughout Ireland's 43 years of EU membership, the Government could always rely upon a level of trust in the European Commission.

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One of its roles was as guarantor of the smaller states' rights. The Apple tax finding that Ireland must claw back €13bn in back taxes raises doubts about that trust. It may well be the start of a new and more confrontational relationship between Dublin and Brussels.

The brutal reality is that since the economic crisis erupted in late 2008, there has been a growing body of evidence that bigger countries can bend the EU rules. By contrast the smaller states are treated much more harshly.

The Dublin Government's frustration erupted in the wake of the Apple verdict. Finance Minister, Michael Noonan, harked back to 2011 when the then French President, Nicholas Sarkozy, said Ireland should increase its corporation tax from 12.5pc as a condition of the bailout.

The Taoiseach, who has been very sparing in his public appearances around Apple, said something even more explicit when he was interviewed on RTE news on the issue.

"This is about the right of a small nation. I'm not sure whether the European Commission wants to ingratiate themselves with more powerful countries than ours, but this is a small country," the Taoiseach said.

Let's not forget that Fine Gael has long been the most pro-European of the Irish parties. Some of its members will tell you that this was what attracted them to the party on day one.

When Ireland entered the bailout in November 2010, the country had to submit to an intensive regime of economic supervision. The same happened to Cyprus in 2013.

But Spain got hefty EU aid to help with its banking crisis and refused the kind of close level supervision to which Ireland was subjected. More recently nobody has objected to Italy using taxpayers' money to aid its ailing banks before subjecting bank shareholders to losses.

France, the EU's second most powerful country, has repeatedly flouted the bloc's budgetary deficit rules. In theory they should be fined; in practice this has not happened.

You may note that I am leaving Greece out of this. There are strong arguments that the Greeks were also harshly treated as a weaker member state. But there are also signs that a deal of Greece's travails were self-inflicted.

The other factor in the Apple case is the sheer size of the correction. Since 2000 the EU has acted in 254 cases of abuses of competition law and the total clawback in corrections, penalties and fines comes to under €11bn. The amount in Apple's case is €13bn plus interest.

Michael Noonan has argued that Ireland is contesting an important principle around member states' rights to fix taxes. But the reality is that the sheer scale of the correction is a huge factor in the decision to appeal to the EU Courts in Luxembourg.

An expected penalty in the hundreds of millions would have been deemed "awkward but not fatal." The tens of billions involved here changed everything.

Another indicator of "Brussels arrogance" is the failure to publish a full report of the decision. It has been forwarded to the Government but may not be published because it contains too much "commercially sensitive information."

That presents a major contradiction in actions which the EU executive argues is about upholding fairness and transparency. We had been led to believe that this report was ready to go earlier this year but publication was delayed lest it influence the general election here or the Brexit referendum.

All in all, we are clearly headed for a new era in Ireland's EU relations.

John Downing is an Irish Independent political correspondent

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