The Corner

Economy & Business

The EU’s $14.5 Billion Shakedown of Apple

I’m usually slow to defend corporations these days because so many of them have built cronyism into their business models and are free markets’ worst enemies. But The European Union’s shakedown of Apple is outrageous. The Wall Street Journal reports:

The European Union’s antitrust regulator has demanded that Ireland recoup roughly €13 billion ($14.5 billion) in taxes from Apple Inc., after ruling that a deal with Dublin allowed the company to avoid almost all corporate tax across the entire bloc for more than a decade — a move that could intensify a feud between the EU and the U.S. over the bloc’s tax probes into American companies.

The tax payment is the highest ever demanded under the EU’s longstanding state-aid rules that forbid companies from gaining advantages over competitors because of government help.

There is so much wrong here:

‐ Apple followed the rules in place in Ireland, and what it did is legal both in Ireland and the United States. So the EU is retroactively changing the rules on the company — i.e., this is a shakedown.

‐ The EU is violating the Irish government’s right to set its own taxes. It showing its lack of respect for nations’ tax sovereignty.

‐ The EU shows that it believes that the only proper form of taxation is high and punishing. It believes that low tax burdens are a form of “state-aids,” which is laughable.

‐ A low corporate-tax rate is the best way to undermine the incentive to avoid taxes.

‐ If the EU thinks multinational companies are playing games to under-state profits in high-tax nations and over-state profits in low-tax nations, the various national governments should simply adjust their “transfer pricing” rules.

‐ This is just the beginning: Other companies are expected to get hit with this shakedown tax bill from the EU.

The U.S. Department of Treasury is fighting the EU on this issue. And it is right to do so even if the only reason it fights is to retain as much revenue from multinational corporations.

My prediction: This type of behavior from the EU isn’t going to help its economic outlook. On the contrary, it will hurt the EU where it can afford it the least — economic growth.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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