The Apple tax issue has thrown up a far more interesting question. The ruling was a "Competition Ruling," not a tax ruling and it is vital to understand the difference between the two.
What the recent ruling is not saying is that our rate of corporation tax is too low because that would be a tax ruling and in the EU, it is up to every country to set their own rates of taxation. What that ruling is really saying though, is that Apple paid a lower rate than all of the other resident multi-nationals here and this special treatment of one company, according to them, amounted to unfair state aid.
In effect, they are saying that if we choose to offer Apple a zero-rate or tax-free status then that's fine as long as Google, Facebook, Microsoft, Intel, IBM, Pfizer, Eli Lilly and all of the rest of them are offered the same tax free status. Margrethe Vestager said as much in her announcement. Competition rulings seek to give multi-nationals a level playing field in theory, thus ensuring that one does not have a false unfair advantage over another.
That's okay in theory and if properly applied, the supermarket chains would have no advantage over the corner shop. But we know that whenever the big supermarket moves in, the corner shops begin to close down. The theory and the practice become substantially at variance with each other. You see, the bigger guy has the money and buys in volume so he has more clout. The supermarket chain tells the supplier what it will pay for their produce, not the other way around, and if the supplier doesn't play ball with that, they too are out of business. It's the economies of scale in action.
So we know and understand that the bigger pockets always get the better deal because that reality lies at the core of economics. They buy in large quantities and pay lower unit prices in return. As a result, we now have farmers associations complaining that the supermarkets are dictating what they produce and what price they'll get for it. In economics it is called the, "Power in the chain," meaning the supply chain. The middleman supermarket has the power in the produce/buyer equation.
The bigger guy therefore will always secure the preferential deal and while I do not know the details, I have no doubt that the big global names who have settled their European headquarters in Ireland will all have made the best deal they can for themselves, Apple included. So this competition ruling is a moral one rather than a legal or business one. It is the expressed ideal that in a utopia of fairness and equitability, everyone will pay and get an equal share. That is a fine ideal as long as you also admit it will never happen.
But what is true for supermarkets and corner shops is also true for big countries in relation to small countries. Don't tell me that Ireland is on a level playing pitch with Germany or France because we are not. We are surrounded by ocean, have unfavorable weather, a poor business and social infrastructure, low population and we suffer because of our remoteness from the marketplace. As we learned from the banking (rip-off) crisis, being a member of the EU changes none of that. Far from being bailed out by them we were shackled with crippling debt for generations to come. Europe's big boys simply got together and picked Ireland as the fall guy to protect their own interests. The only interest Ireland received was the massive interest from debts imposed on us. German banks gambled away their money and lost with the result that the Irish taxpayer was told to bail them out. That is what really took place after the dust had settled.
And now those same European faces are back accusing us of being unfair for trying to stimulate economic growth, against the odds, in order for us to raise the necessary funds to meet that debt imposed on us by those same European faces. Our then Minister for Finance, Brian Lenihan, was ordered by the EU to accept the ahem, bail-out. He was ordered to bail out our banks so that they in turn could bail-out so many European banks. These same guys are now lecturing us now on fairness!!
One of those faces is in our newspapers this morning. The Frenchman, Pierre Moscovici, is having a good old laugh at our expense as you can see. But he is also upping the stakes. Now that the moral position has been taken by a competition ruling, old Pierre Moscovici wants a, "Tax Ruling," to match it. He's making a list and checking it twice, gonna find out who's naughty or nice and then he intends to shaft us again. This European commissioner for tax affairs has spotted an opportunity for his native France and he promises to establish a, “European black list of tax havens,” to tackle tax evasion within their borders. Doubtless the lad is hoping that all the big Yankee boys here will up stumps and re-locate to France where a secretive Renault-style tax deal can be done with them one-by-one, depending on their planned level of investment over there of course. Apart from the obvious acclaim the French might drench him in, why would the lad do such a thing to us?
Well, for one thing, why not? The unelected bastard knows he can do it and get away with it, Ireland collapses and our few remaining assets go up for sale to the lowest foreign bidder via NAMA and, who knows, perhaps he sees sufficient civil strife in the wake of all that to warrant French soldiers marching down Ireland's streets. Who'd stop him? We certainly couldn't do a damn thing about it and if he had EU backing, we needn't expect any help from our so-called partners. You may think this a fanciful scenario just now but if I'd told you in the nineties that the US was going to tear the Middle-East wide open, you would not have believed that either. We need to get real. We are a mere four and a half million inconsequential people on a small remote island off Europe's shores. A few centuries back they let us starve in a famine. The Irish were considered as pure cannon fodder in times of war and I suggest that in times of peace we are not considered at all.
That, my friends, is why we have learned to box cleverly. David McWilliams put it succinctly this week when he said that 90 per cent of all of our exports come from the multi-nationals here. Any country's viability depends on the relationship between their imports and exports. The more of the latter you have the better off you are. Take away 90 per cent of our exports and Ireland as an entity is not viable. Apple led the way into Ireland in 1980 and could just as easily lead the way out in 2017. Henry Kissinger famously said, "If I want to talk to Europe, who do I call?" Boardrooms in the States look at Europe and then at the biggest of their own breed, Apple. If Ireland is good enough for Apple, they say to themselves, then it's good enough for us too.
Before the last election, officials here hinted that any tampering with the relationship we have with our multi-national guests would be a red-letter issue in short order. In plain-speak that means, we would pull out of the EU rather than risk our guests pulling out of here. The proposed CCCTB or common consolidated corporate tax base for Europe is a case of the big countries bullying the small ones in the interests of the former.
In an earlier article, I pointed out that we Irish never had an industrial revolution but when we began to attract the big Pharmas and IT giants, we suddenly had an industrial revolution, albeit a couple of centuries late. How would France or Germany have reacted had their industrial revolution been halted all those years ago? If it had happened, then theses countries today would be poor, uneducated agricultural wastelands and may not even have successfully unified.
So it is ironic, given our fawning and unwavering support for the EU, that they should now go for the jugular so soon after mercilessly beating us senseless with their so-called bail-out. I am only glad that finally, an Irish Government has the balls to stand up to them on our behalf. So far, Michael Noonan has only kicked for touch by opting for a session in the European Court of Justice. It ties up the Apple issue for five years and I bet he's hoping for the breathing room necessary to defuse things before they really blow up and we're given no choice.
However, in the light of current utterances from the continent, BREXIT is beginning to make more sense. It would not surprise me one bit to hear that Dublin is considering its own exit strategy should all hell break loose. There will have to be a plan B after all.