Wednesday 21 February 2018

Adrian Weckler: EU's Vestager on Irish tax mission

Commissioner Margrethe Vestager speaking at the Web Summit last week Photo: Bloomberg
Commissioner Margrethe Vestager speaking at the Web Summit last week Photo: Bloomberg
Adrian Weckler

Adrian Weckler

Was Apple boss Tim Cook right when he told this newspaper last year that the European Commission's €13bn back-tax penalty ruling was "political crap"?

Last Tuesday, Competition Commissioner Margrethe Vestager didn't give much of a contrary impression.

"We see a change in Europe," she told a handful of us at a Web Summit press conference in Lisbon.

"There is now a more solid hope."

The Dane was addressing questions about tougher, more consolidated tax rules being introduced across the EU.

"I think we [the Commission] can have an approach [to new tax plans] by next spring and then the political debate will get started. But we treat it as a matter of priority because some members states are very ambitious."

She then said that she "appreciated" support from France, where President Macron says he wants a unified corporate tax rate across Europe.

So while Cook's remarks about Apple's €13bn fine being "political" were initially dismissed by many, they may not actually have been that far off.

To be fair, Commissioner Vestager can argue that she is merely implementing competition law, which is her absolute duty.

But with regular references to "society", "greed" and "fear" in the debate over tax and EU law, the regulator is reflecting distinct policy signals that rhyme closely with tax consolidationists.

So with the UK now set to leave in 2019, a betting person would reasonably conclude that tax consolidation across the EU is now an official goal that is taking root across the European Commission.

That has not gone unnoticed by tech multinationals based in Ireland. Talking to some of them in between Web Summit events last week, I got the impression that all of them can see what's coming down the line.

So far, few of them appear to think it warrants any cutting of investment in Ireland. Two of them - Slack's Stewart Butterfield and Asana's Dustin Moskovitz - say the opposite, that they're bedding down in Dublin as primary European operation centres. Another giant, Facebook, recently made similar noises with founder Mark Zuckerberg telling Taoiseach Leo Varadkar that hundreds more jobs were on the way. (Mind you, he sort of had to say this, as Facebook recently announced a new building with room for 800 extra staff.)

But that's not to say there will be no reverberations. Other murmurings at the Web Summit from eminently-well connected people centred on well-established tech multinational companies reassessing their Irish operations because of a shift in European policy.

There is often such chatter. But this time, the focus of it is more political than cyclical. Companies are starting to believe that tax change is coming from above. The next 12 months may provide a real test of how much such companies really mean it when they say that they're here for the "great talent".

They're certainly under no illusion as to Dublin's inability to plámás Vestager. Indeed, the Commissioner sharply criticised Dublin for not yet initiating collection of the €13bn in Apple back tax, despite 15 months having passed since the ruling.

And she went further, pouring cold water on stories spun out of Government circles about understandings entered into with her department about pre-Christmas collection of some of the money. "We have no indication when it comes to the time perspective in recovering the unpaid taxes from Apple," she told me.

"We do have from the Irish Government the progress made when it comes to figuring out how to deal with such amounts of recovered taxes. I respect the complexities of how to keep €13bn while the court case takes place. But we need to see progress when it comes to making the recovery because we have seen that the Belgians have done it, the Dutch have done it and Luxembourg has done it in terms of recovery [of other financial rulings]. Because of equal treatment, we expect the Irish to do it."

All of this comes after recent policy statements boldly shifted the emphasis onto common taxes across the EU.

"The growing challenge of ensuring that the digital economy is fairly taxed has still not been adequately addressed, primarily due to a lack of international consensus and the multidimensional nature of the challenge," said the Commission a few months back, outlining new initiatives to make tech firms pay more tax in the bigger countries.

Ireland has said it will not agree to a common corporate tax rate across Europe for good reason. We still need lower tax rates.

We simply don't have the infrastructure, universities, cities and home-grown companies to stand alone against metropolitan powerhouses a short flight away.

(Even Lisbon, which few would immediately think of as one of Europe's natural A-list destinations, has considerable infrastructural advantages over Dublin. Getting in and out of the Web Summit, itself hosted in a venue well beyond any Irish equivalent, was quick because of their Metro system directly from the airport.)

But we may not have a choice for long. We're increasingly isolated in the EU on this issue. And now one of the Continent's most important regulators is now signalling her "hope" that tax infrastructure conditions will soon change around Europe.

Small and medium-sized tech companies that come here don't particularly care about this and never have. Many don't make a profit and won't for years.

They care far more about recruiting staff from Google, Facebook and the other big guys. The real question is whether any of the giants is hooked more on tax rates than they're letting on.

We still don't know whether Cook was right about politics in the Commission's tax decisions. But as Vestager said last week, "things have really changed".

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