Thursday 29 September 2016

Politicians don't work for Apple, they're supposed to work for you

Ordinary people and businesses don't get tax deals. They follow the rules and pay what's due, so it's right to expect the same from a multinational, says Anneliese Dodds

Anneliese Dodds

Published 04/09/2016 | 02:30

Anneliese Dodds
Anneliese Dodds

The EU's announcement last week that Apple owed €13bn in unpaid tax was a watershed moment: the biggest state aid decision in history involving the biggest company in the world. For those who want to listen, the message is clear: our tax rules need to change.

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Not everyone will listen, of course. Some have already come out to oppose the EU's decision, calling it an unfair "fine" and pointing out that Apple has not broken the law. This is to completely - and perhaps deliberately - miss the point.

Firstly, the €13bn is not a fine; it is simply the amount of tax that Apple should have paid since 1991 had they been charged Ireland's corporation tax rate. The same rate of tax that every other Irish business has to pay, because they don't have a fleet of expert lawyers and accountants to advise them.

Secondly, Apple may not have broken the law, but they certainly got a favourable outcome. And Apple merrily took that deal, with the pretty clear unspoken arrangement being that they would just up sticks and move to another country if Ireland didn't accommodate them.

The day that your local plumber can walk into the Revenue Commissioners and get a special tax deal by hinting that he'll take his business elsewhere is the day you can say that Apple have been unfairly treated. Unfortunately for your plumber, he can't. Ordinary people and businesses do not get to negotiate special tax deals - they follow the rules of the country and pay their taxes accordingly. And so should Apple.

Sadly, that message does not seem to be getting through. Apple will appeal the ruling, and the Irish Government will too. That might be a hard sell to Irish taxpayers, though: after years of economic difficulties following the crisis, Ministers want to turn down the opportunity to recoup the equivalent of the entire annual health budget.

That's not to mention how taxpayers in many other European countries might be feeling at the moment. Apple made European profits of €87bn over the last ten years - from sales in France, Germany, the Czech Republic - and paid just €334m in tax, almost all of it to Ireland. In the Czech Republic, Apple had sufficiently engineered things so they were eligible for a tax credit of €45,000!

We now live in an increasingly digital world, in which companies can hop across national borders until they find a suitably "accommodating" tax regime. And it's not a zero sum game - we can't just say that if Apple isn't paying taxes in one EU country, it's at least paying them in another. An effective of tax rate of 0.005pc in 2014 meant Apple basically wasn't paying taxes to anyone: we are all losers here.

To get ourselves out of this situation, countries are going to have to work together - designing a tax system that works for all of our citizens, not constantly undercutting one another in a race to the bottom that serves no one's interests.

That is important for most countries, but it is vital for two economies as closely intertwined and dependent as those of the UK and Ireland.

The EU is a world leader when it comes to the kind of cooperation we need to tackle tax evasion and aggressive tax avoidance.

I campaigned with all my might for the UK to remain in the EU to be part of that project.

Now that the UK is leaving the EU, it's more important to me than ever that we - and all our European neighbours - continue to uphold the kind of high moral standards exemplified in the decision in the Apple case.

In short, no one should be above the law - and taxes are the price we pay for a civilized society, not a bargaining chip in a game of poker between multinational companies and governments.

Anneliese Dodds MEP is the UK Labour Party's tax spokesperson in Europe

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