Sunday 23 October 2016

Does the Apple saga mean the end of our on-off love affair with EU?

Published 03/09/2016 | 02:30

Apple chief Tim Cook Photo: Steve Humphreys
Apple chief Tim Cook Photo: Steve Humphreys

Could this Apple saga mean the definitive loss of Ireland's 'EU innocence?' Could we see Irish indifference and impatience with Brussels turn to open hostility?

  • Go To

Two key 'flip-flop' indicators this week suggest we cannot rule out such a negative development of Europhobia among the Irish people. We saw Fine Gael go to war with the EU Commission, while Sinn Féin took Brussels to its heart.

EU Competition Commissioner Margrethe Vestager Photo: REUTERS/Eric Vidal
EU Competition Commissioner Margrethe Vestager Photo: REUTERS/Eric Vidal

All of that while Ireland stood in as the sandwich meat between the world's biggest company, Apple, and the world's biggest trading bloc, the European Union.

And if all of that was not bizarre enough, the Irish Government was left flatly refusing to have anything to do with a potential €13bn back-tax windfall from Apple, following the Brussels bombshell, which landed at noon last Tuesday. An unseemly domestic political squabble within the hybrid minority Coalition compounded all the confusion.

By yesterday afternoon, Michael Noonan, a kingpin in Fine Gael, which always boasted it was the most "European" of all the political parties, was just fractionally short of shaking his fist at Brussels.

"It's within our competence to fix the tax rates. And no bridgehead by any Commissioner is going to change that perspective in Ireland. We'll fight it at home and abroad and in the courts," Mr Noonan said belligerently.

The Finance Minister's tone was in marked contrast with his public utterances in 2011-12 when Ireland's hand was in the EU bailout dog's mouth.

But Mr Noonan's shift in emphasis was well topped by Sinn Féin, which had solidly called "No" in nine consecutive EU referendum campaigns from 1972 until 2012. Now, in what must surely be the most contentious call ever by the EU authorities involving Ireland, Sinn Féin goes all pro-Brussels.

"This is not about the EU trying to encroach on our tax sovereignty. It is about a level playing pitch and ensuring everyone pays their fair share," Sinn Féin's Mary Lou McDonald announced.

The Anti-Austerity Alliance-People Before Profit were abandoning their anti-EU default position to say much the same thing.

Suddenly, the euro-lovers are gone all hostile. The euro's perennial opponents are coming over all europhile. What's the average Irish citizen to think?

In essence, the European Commission said Ireland broke EU state aid laws and must recoup €13bn in back taxes. But Michael Noonan has said Ireland does not want that illusory money and utterly rejected the EU Commission's finding, which came after a three-year investigation.

Many developed countries grow more concerned that tax avoidance by stateless multinational behemoths like Apple mean they cannot generate enough taxes to maintain living standards. The OECD has been working with the G20 group of nations for the last three years on designing a 'Base Erosion and Profit Shifting', or BEPS package, to step up co-operation against global tax avoidance.

The European Commission's souped-up investigations of "aggressive tax planning", which led to this Apple ruling, are part of the same concern by western governments. You can add the fear in Brussels that the OECD/G20 move is voluntary and will be very slow - if it delivers any result at all.

Much to the fury of our EU neighbours, Ireland has traded on its very low tax company rates for decades to attract investment and jobs. But Ireland must also abide by EU state aid laws, which mean authorities must not favour particular companies with special tax treatment.

According to the three-year European Commission investigation, two Irish tax rulings back in 1991 and 2007, did give Apple unfair advantage. One allowed the company to shift profits on Europe-wide sales to Ireland to benefit from lower tax. The other allowed Apple shift profits again to the company's so-called headquarters, which existed only on paper.

EU Competition Commissioner Margrethe Vestager has insisted that in 2014 Apple used this government-sanctioned scheme to pay only 0.005pc in tax on its European profits. She has spelled that out as paying €50 on €1m.

Apple does not believe there are any grounds for paying up and instantly announced an appeal to the EU Court of Justice. But it took until yesterday for Fine Gael to assuage their Independent partners and agree a similar appeal by the Government. In essence, Mr Noonan argues that no government should be obliged to change the rules of the game long after the game has been played. Ireland would lose credibility with investors if it whacked companies retrospectively for tax.

He also argues that Apple is in the clear, and paid what was legally owed in this jurisdiction. Ireland has no responsibility to become a tax policeman of profits generated from sales in other European countries.

And in echoes of Brexit fallout, the Government is invoking its sovereignty, insisting Dublin and not Brussels decides how and whom to tax.

The global stakes in the Apple story are huge as big multinationals square up to shaky alliances of prosperous nations, with the EU looming large in their midst.

But the potential fallout for Ireland's EU relations are equally significant for this country. A finding of this magnitude has the potential to sour Irish people's views about the "European project" if our political leaders do not take careful stock of things, explain the complications in simple terms and maintain a civil tone.

In our four-plus decades of EU membership, our fallback position has generally been an acceptance that it was a "good thing". But we have also been around a few tricky corners in our relations with the EU bloc.

In the early 1990s, there was widespread public disenchantment amid claims that Ireland's fledgling currency, the punt, was left unprotected during prolonged currency turmoil in the EU's currency grid, the ERM. The Irish Government went to war with Brussels and the other EU capitals in the mid-1990s, under Taoiseach Albert Reynolds.

That was for a better share of regional and social aid funds, which were designed to strengthen poorer economies ahead of a border-free single market and a single currency. The grant-aid struggle was largely successful and reinforced moves to prosperity.

The new millennium brought new challenges. In 2001, Irish voters rejected the EU Nice Treaty and in 2008 they did the same with the Lisbon Treaty. But both treaties were subsequently approved by voters in referendum re-runs soon afterwards, after some clarifications, better campaigning and higher turnouts. Naturally, the No advocates cried foul. But there were no lasting public backlashes and the re-run Yes verdicts were by a convincing margin.

The big picture lesson was that middle-Ireland's denizens were and are benignly indifferent to the EU. But if it is characterised as the enemy of multinational jobs in Ireland, such a fragilely positive stance could rapidly shift. There is a multitude of factors involved in this complex tale.

Irish Independent

Read More