This innovation by Apple has nothing to do with the iPhone
The recent furor over Apple’s minuscule tax rate in Europe rekindles debate over the need for global companies to pay their fair share
The row over Apple’s “interesting” tax arrangements in Ireland rumbles on; according to the European Commission it was able to secure a tax rate as low as 0.005 per cent. Tim Cook, Apple’s chief executive, insisted that his company’s large presence in Ireland was never about the money and that the EU’s meddling in this matter is nothing more than “political crap”.
In these circumstances we must, yet again, turn to that great sage H.L. Mencken who famously said: “When somebody says it’s not about the money, it’s about the money.”
That old satirical bruiser sure knows his stuff because you need to be wearing the latest Apple device, heavily rose tinted, to believe that the late Steve Jobs was not focusing on taxation arrangements when the Irish government lured his company to establish its European headquarters in Cork.
Back then I was covering industrial policy for The Observer in London and would regularly find my desk flooded with press releases from the hyper active Irish Development Agency emphasising that Ireland offered the lowest corporate tax rates in Europe to incoming international investors.
Ireland, suffering from the fallout of the so called “troubles” across the border and uneasily dependent on an agriculture-based economy, took the view that it could only build up its industrial sector with foreign investment and then went for it like the clappers.
And it worked, particularly with newer companies like Apple that had no base in Europe and could literally start with a blank piece of paper in planning its EU debut.
Now the European Commission has declared that Ireland’s tax deals with Apple are in breach of competition policy and has ordered the Irish government to secure 13 billion euros in back taxes from the American company. What comes next will be a very long battle with much bitter recrimination.
Meanwhile in Ireland itself many citizens are wondering why their government is so reluctant to enjoy this cash windfall; they do not share the view that large overseas corporations should not be obliged to pay anything like the taxes demanded from hard working local citizens or domestic companies. But the Irish government argues that forcing Apple to pay up will fundamentally upset its industrial policy and undermine Ireland’s competitive position within the EU.
Ireland is not alone in using a low tax regime to lure investors. In some parts of the world there is an unseemly race to the bottom of the tax tree to lure investors. In fact part of Hong Kong’s long standing government philosophy has been to use a low tax regime to encourage investment; the significant difference being that this regime is for everyone not just external investors.
However it raises the basic question of whether it is either right or desirable to have a tax regime which, in effect, is designed to allow the richest companies to pay a fraction of the tax that is levied on far more humble individuals and corporations.
Taxation and how to avoid it is quite an obsession among both business leaders and various ideologues who claim to be in favour of free enterprise but, when it comes down it, really just want low taxes.
The moral argument over taxation is pretty straight forward, yet the very words – moral argument – elicit shrieks of derision among people who pride themselves on their pragmatism and maintain that out in a place called “the real world”, it’s dog fights dog with no space in between for feint hearts who agonise over questions of morality.
Yet there is no escaping moral questions, even if they are dressed up in other forms of ideological clothing. So the role of taxation in society needs proper discussion, and, yes, that means looking at appropriate levels for taxation but spare us the hypocrites who keep saying that only idiots do not strive to minimise their exposure to taxation.
These hypocrites are, of course, the same people who expect the police to show up the minute they get into trouble and most certainly expect to see a fire engine arrive within minutes of a fire breaking out in their premises, not to mention taking for granted the provision of roads, street lighting and, well, you get the picture. Apparently it’s the little people who should be paying for all this.
Then there’s the question of whether these low tax regimes really work in attracting not just global investment per se but investment that helps build economies.
Hong Kong is often ranked second in world direct inward investment league tables but most of the money flowing in does little more than push up property prices. Ireland however has shown itself to be much smarter than most countries in utilising inward investment, maybe therefore it’s not all about the money after all.
Stephen Vines runs companies in the food sector and moonlights as a journalist and broadcaster