Apple proudly states on the back of its iPhones: “Designed in California, assembled in China.” The company founded by Steve Jobs, should have added, “and sold in Europe tax-free.” Essentially, the company hasn’t paid taxes on the continent for years. Or paid very little. It has implemented a clever system that allows it to register its profits in Ireland and be taxed for the sum of… 0.005 percent.
This is a far cry from the already very generous tax rate of 12.5 percent usually applicable in Ireland. Not for much longer. The European Commission has decided to impose a fine of 12 billion euros on the company. Or more precisely, it has asked Apple to reimburse the Irish tax authorities for the total sum of undue tax benefits received from 2003 to 2014, ruling that it amounted to illegal state aid.
The affair has caused shockwaves in Silicon Valley and provoked Washington’s fury, the latter attempting to frighten Europeans by declaring that the “unfair” decision could “undermine foreign investment … in Europe.”
This decision is just. It is not normal, as long as companies are taxed, for a company to be exempt from paying tax, even if they’re American. This situation is untenable in a world where states are unable to make ends meet and where digitization allows multinationals to declare their profits in more profitable pastures. The threat to Apple’s business is minimal, considering it currently possesses $200 billion in cash.
This decision is strong. If the United States is screaming bloody murder, it’s because it knows that it is dealing with a bigger power. If the European Commission’s Directorate-General for Competition can’t bring the United States to heel, nothing ever will. It was the commission that blocked the merger between two 100 percent American companies, General Electric and Honeywell, at the beginning of the century in the name of protecting competition. It was the commission that then attacked Microsoft’s abusive monopoly. It was the commission that dared to stand up to the digital giants, the infamous GAFA* who obey the rule of the new capitalism: winner takes it all. But it’s a small step from achieving success to abusing a dominant market position. With all due respect to those who denigrate the European Commission, only Europe has the power to regulate and counter this predatory capitalism.
This decision has far-reaching implications. Ireland plans to appeal the decision, as is its right. It wants to continue being a Trojan horse, minimally taxing multinationals’ huge profits, allowing it to get by while financially stripping its European neighbors. This profiteering strategy, the so-called stowaway, is no longer possible: All companies must settle reasonable tax obligations. It’s a warning, too, for the British, who after Brexit were dreaming of becoming a tax haven offering access to the European single market.
This decision shows that Europe is changing, under the guidance of the commissioner for competition, the Danish politician Margrethe Vestager, of Frenchman Pierre Moscovici, who is pushing for tax standardization, and of Jean-Claude Juncker. Juncker, the former prime minister of Luxembourg, was rightly accused of having organized tax evasion in Europe over a number of years. Now, he hunts tax evasion down. You have to give credit to the zeal of these new converts.
*Editor’s note: GAFA is an acronym that stands for Google, Apple, Facebook and Amazon.
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