Apple and Ireland hear bark of the Great Dane

Kyran Fitzgerald assesses the implications of the EU ruling on Apple’s taxes pressed by competition Commissioner Margrethe Vestager, the highly experienced Danish politician

Margrethe Vestager is a Danish politician who calls it as she sees it. Last week, the Competition Commissioner had Apple and the Irish Government in her sights.

The ruling by her directorate general decreed to the effect that the Irish Government — by offering special tax arrangements to Apple over a 25-year period — broke EU rules governing state-aid rules.

The Competition Directorate General went on to instruct Apple to repay the Government a staggering €13bn, plus interest, in back taxes.

Soon, some commentators had declared Christmas and started planning how to spend the booty after this Euro lottery “win”. The Apple spin machine moved into overdrive. In an extended RTÉ interview, CEO Tim Cook attacked Europe’s “overreach”.

His core argument, repeated elsewhere: “The conversation should be about future taxes, not retroactive taxes.” This argument will be at the heart of the Apple appeal against the ruling.

Mr Cook talked of the “long- term romance” between Ireland and Apple, a romance that had not resulted in any “sweetheart deals”. Fine Gael and Fianna Fáil both sang in unison about the need to preserve certainty.

Michael Noonan was quick out of the traps to suggest that the Irish Government would be appealing the judgment, while many on the left insisted that no appeal should be lodged.

This is all mere political shape-throwing. Apple has already signalled that it will appeal the ruling to European courts and there the matter will rest, along with €13bn in an escrow account, for several years.

By Friday, the Cabinet had come round. It could hardly have done otherwise, as to do anything else would be to concede Revenue had acted beyond the law. What is clear is that the business, political and the bureaucratic establishment have been thrown into a bit of a tizzy.

The €13bn figure — many multiples of what the government led people, itself included to expect — caught everyone on the hop. The folks on Merrion Street were like deer caught in the headlights of a juggernaut. Where were Ireland’s eyes and ears in Brussels, one wonders?

Fianna Fáil’s Willie O’Dea put his finger on it, warning that we faced the loss of our fiscal independence. We would end up as “a glorified county council,” he warned.

Senior officials and politicians have difficulty seeing beyond the post-1960 job creation strategy with its heavy emphasis on tax-based competition.

Yet, there is a real sense that the ground is shifting. No one is quite sure in which direction.

In truth, we may be in the early stages of a major battle of wills between those, many in Paris, who favour pressing forward with an EU-wide system of corporate taxation where tax revenues from international corporations would flow to member states based on the size of their domestic market.

The EU’s future should not be left to graduates of the École Nationale d’Administration for whom French interests always come first.

These centralising bureaucrats have a vision of Europe at odds with that held by an increasingly large proportion of its citizens, many of whom have grown sick and tired of bossy regulators.

But, equally, Ireland cannot line up unthinkingly behind multinational behemoths. We do actually need the EU to remain as a strong organisation prepared to act against transnational corporations which have amassed vast resources.

Apple alone has almost €250bn sitting in accounts and awaiting official repatriation to the US.

At the same time, it must seek to allay the fears of the many multinationals with investments in this country, not to mention those who might be considering investing here. It is a delicate game.

We do not want to be on the wrong side of history, but neither should we permit ourselves to be co-opted into a consolidated corporation tax arrangement of the sort being promoted by the EU Commissioner for the Economy, France’s former finance minister Pierre Moscovici, a clever operator who is lurking like a crocodile waiting to tear away a big chunk of our tax revenues.

In January 2015, Ms Vestager and Mr Moscovici published a joint article in the Guardian newspaper which began with a jolly joke: “2014 was the year in which the world discovered that there is no whiskey in a ‘double Irish’ and no cheese in a Dutch sandwich.”

The pair warned that unfair tax competition was leading to a race to the bottom, with the losers being the taxpayers, smaller firms and national governments.

“It is in that context that the EC is committed to reviving its proposal for a common consolidated corporate tax base” where “the states hosting group subsidiaries would share the tax among them.”

Unsurprisingly, Ryanair boss Michael O Leary advised the Government to “politely” tell the EU to take a hike, citing his company’s largely successful appeal to the European courts against another ruling.

Significantly, one of Ms Vestager’s predecessors as competition commissioner, Neelie Kroes, has criticised the ruling, arguing against the retrospective nature of the judgment.

Ms Kroes, who took actions against companies like Microsoft, these days is a director of Uber, the online taxi firm. As a Dutch citizen, she may also be conscious of the threat posed to her home country by the ruling.

Ms Vestager served as minister of education, economy minister and deputy prime minister. In 2014 she moved to Brussels. Ms Vestager was a model for Birgitte Nyborg, the lead character in Borgen, Danish TV’s answer to The West Wing.

Actress Sidse Babette Knudsen, who played Nyborg, reportedly shadowed her for several days when prepping for the role.

Ms Vestager is a liberal politician, but one who has served under a Social Democrat prime minister, Helle Thorning-Schmidt.

Ms Vestager has three daughters, and a husband who teaches maths and philosophy.

In Brussels, she had already made her mark, commencing investigations into the tax affairs of Fiat, Starbucks, and Amazon.

A major investigation into the activities in eastern Europe of Russia’s largest company, Gazprom, is at an early stage. She also has speeded up an antitrust investigation into Google over its alleged abuses of its dominant position.

She is already seen as a harder nut to crack than her Spanish predecessor, Joaquín Almunia. It may be time for the makers of Borgen to consider setting the next series in Brussels.


Lifestyle

Ciara McDonnell talks to four high-profile people about their festive traditions and favourite tracksHere's what has these famous faces rockin’ around the Christmas tree

More From The Irish Examiner