Apple Inc., the US corporate parent of dozens of foreign legal entities, has been hit with a $14.6 billion tax bill by a commission of the European Union. At the heart of the commission’s complaint is an alleged antitrust violation rather than a tax dispute per se: Apple is accused of negotiating a sweetheart arrangement with Ireland, in exchange for creating thousands of new jobs there. Under the arrangement, Apple reportedly funneled millions in European profits to its Irish headquarters – where those profits were taxed at a very low rate. Therefore other EU nations where Apple has operations and/or sales suffered tax losses, due to Ireland’s unfair ‘competitive advantage’ (i.e., lower tax rates). Or, as a bureaucrat might say, Apple receives illegal tax benefits from Ireland.
Politicians and elites viscerally hate any form of tax competition – at least for the plebes. See, for example the Organisation for Economic Cooperation and Development’s ongoing quest for ‘tax harmonization’ among its member nations. See also the seething hatred for ‘offshore’ tax havens, which generally are small, relatively poor island countries trying to attract banking clientele or corporate registrations. Journalist David Cay Johnston, for example – who never saw a tax he didn’t like – has wasted gallons of ink in the New York Timesdecrying wealthy Americans who dare to have a Cayman bank account without duly notifying Uncle Sam.
But in the end, tax competition tends to reward sensible countries and punish rapacious one. Hence the need for supranational quasi-governance from bodies like the OECD and the European Parliament – to prevent the Irelands of the world from treating their taxpayers a bit better.
Aside from the bizarre and unworkable transfer of national sovereignty to an EU body with fuzzy tax and regulatory powers, Apple’s predicament raises questions about its hypocrisy and corporate political power generally. It’s a bit rich to hear Apple CEO Tim Cook suddenly become concerned over the ‘sovereignty of EU member states.’ Cook, after all, is an outspoken progressive who presumably favors the kind of activist international tax and regulatory bodies exemplified by EU bureaucrats. He believes in putting people – and the environment – before profits, telling climate-change deniers to ‘get out’ of Apple stock. And he clearlysubscribes to the ‘stakeholder’ theory of corporate responsibility.
This post was published at Ludwig von Mises Institute on Aug 30, 2016.