Progressives worldwide are celebrating a whopping $14 billion tax bill slapped on Apple, Inc., by the EU for the multinational's evasive tax practices in Ireland—so why is the Irish government up in arms about the windfall?
The European Commission on Tuesday issued a sweeping ruling against Apple demanding that the company pay Ireland $14 billion in back-taxes. The commission found Ireland's tax levy on the multinational company a "sweetheart deal" that amounted to illegal state aid under European policy.
"These sweetheart deals that let multinationals minimize their tax cannot be tolerated. If people's trust in the tax system is to be restored, European governments must act immediately to end these special deals."
—Aurore Chardonnet, Oxfam
Consumer advocates and corporate watchdogs cheered the ruling, arguing that absurdly lenient corporate taxes amount to nothing less than fraud on middle-class taxpayers who are not granted such allowances and must pay their fair share.
Yet both Apple and Ireland are appealing the decision, and the U.S. Treasury Department has been warning Europe since last week to avoid levying a massive tax bill on Apple or to be prepared to face unspecified "potential responses" from the United States.
Apple paid a corporate tax rate in Ireland that amounted to only 0.005 percent of its European profits in 2014, the Daily Beast noted, while Ireland's official corporate tax rate is 12.5 percent.
"Apple paid the negligible rate of tax due to two special tax 'opinions' given to the company in 1991 and 2007 by Irish authorities," the Daily Beast reported. "These opinions are at the core of the argument—the EU claims they were available only to Apple, Ireland argues that they applied to all Irish registered companies."
"These sweetheart deals that let multinationals minimize their tax cannot be tolerated," Oxfam EU's policy advisor on tax policy and inequality Aurore Chardonnet said.
"The EU should not give into American pressure just to spare U.S.-based multinational corporations adequate taxation."
—Fabio De Masi, European United Left
"If people's trust in the tax system is to be restored, European governments must act immediately to end these special deals otherwise people’s trust in the tax system will continue to evaporate," Chardonnet added.
"The decision by the EU Commission against Apple is overdue. The EU should not give into American pressure just to spare U.S.-based multinational corporations adequate taxation on their profits made in the EU," said Fabio De Masi, a European United Left member of the European Parliament.
The Irish establishment is furious about the EU decision, the Daily Beast observed:
One might have thought that this extraordinary windfall would be a shot in the arm to a state beleaguered by years of austerity, cuts, and the world's biggest bank bail-out on a per capita basis, but the Irish government is furious.
The country's political elite perceive the ruling to be a retaliatory strike on the country for its cherished 12.5 percent corporate tax rate, which has long infuriated fellow European nations, who have far higher business tax rates and see Dublin’s tax policy as lacking European solidarity.
Dublin views the low corporate tax rate as key to its strengthening recovery from a crippling recession caused by a collapse in the property market in 2007 that resulted in the $71 billion bank bail out.
Irish progressive groups applauded Tuesday's ruling and condemned their government's response to it.
The Irish establishment's response to the ruling "shows how subordinate to the corporations our establishment have become—they want a tax haven nation where workers pay countless charges and the wealthy pay nothing," said Ireland's leftist People Before Profit Alliance on Facebook. "Time for an alternative."
Richard Boyd Barrett, a People Before Profit Alliance member of the lower house of Ireland's parliament, called the Irish government's response to the ruling—and the hundreds of thousands of euros the government has spent and will spend to try to defeat it in court—"outrageous":
European countries' special tax rulings have come under public scrutiny since a 2014 investigation by the International Consortium of Investigative Journalists known as the Luxembourg Leaks or LuxLeaks exposed the extent to which Luxembourg courts were slashing multinationals' tax rates through secret "sweetheart deals."
The EU antitrust office is also currently investigating the European tax practices of Starbucks and Amazon.
"Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland—that's a fraud."
—Joseph StiglitzAmazon, Apple, Facebook, Paypal, Etsy, and other multinational technology companies all have offices in Ireland in order to take advantage of the country's low corporate tax rate.
In July, Nobel prize-winning economist Joseph Stiglitz labeled Apple's tax practices in Ireland "a fraud."
"Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland—that's a fraud," Stiglitz told Bloomberg. "A tax law that encourages American firms to keep jobs abroad is wrong, and I think we can get a consensus in America to get that changed."
About $215 billion of Apple's $232 billion in cash is held abroad, according to the corporation's third-quarter earnings results, Bloomberg reported.