For years national politicians have pronounced in chorus that tax evasion problems should be dealt with on a European level. Now that the European Commission has done exactly that -- slamming Apple with a €13 billion bill in back taxes -- the veil has come off. Ireland is appealing the decision. Tax competition is alive and well in Europe.
Ireland's appeal clearly shows how much the framing of the argument on a European level was always a thinly disguised excuse to defend national interests. It also shows that there exists no solidarity whatsoever among states. Like a brothel's madam, the British government immediately trotted out its attractive services, signaling that Apple would pay low taxes in Britain.
Britain's move, and the furiously announced Irish appeal of the decision taken by Competition Commissioner Margrethe Vestager, show just how little European states care for each others’ interests and how far they are willing to go to attract companies to their shores. As written here before, the EU may have been instrumental to preventing new territorial and ethnic wars in Europe, but underneath the blue-yellow veil, economic wars have raged on.
European governments expected Vestager to act against Apple in what is seen as just the beginning of a slew of cases the Commission is preparing to bring against many other companies. But the size of the bill, €13 billion, was not what most expected, as Politico reported.
Hypocrisy
The landmark decision is a watershed moment for national governments. They are now forced to confront a new reality where their scheming to attract companies may be overruled at any moment by Brussels. It also forces them to confront their own hypocrisy.
The Netherlands is a case in point. Viewed by many national tax authorities and non-governmental organizations as one of the main culprits in tax evasion due to its elaborate tax rulings systems and bilateral tax treaties to prevent double taxation, the small country is considered a linchpin of legal tax evasion. (Fancy a Double Irish with a Dutch sandwich?)
In 2008 the U.S. administration listed the Netherlands as a tax paradise. The Dutch government was furious, demanding its removal from the list and pointing to the fact that all its arrangements are strictly speaking not illegal by international standards -- and mentioning the U.S. states of Delaware and Connecticut, themselves candy stores for international tax advisors. President Barack Obama caved.
On the day of Vestager's announcement, the leader of one of the two governing parties in the Dutch government lauded Vestager's decision on his own Facebook page.
Diederik Samsom of the leftist Labour Party -- an outspoken opponent of tax evasion schemes during any given election campaign -- said he was happy for the decision taken some time ago by EU nation states to endow the European Commission with the power to combat dubious tax competition practices by member states.
Yet Samsom's party was also in power in 2008. And the finance minister, also the Labour leader at the time, led the fight against Obama's tax paradise moniker.
Current Finance Minister (and Eurogroup chair) Jeroen Dijsselbloem, himself a Labour member, led the fight against excessive bonuses for bankers but was quick to state shortly after the Brexit referendum that his own tough rules allowed for attractive conditional exemptions, which -- some EU member states like the Netherlands hope -- will see UK banks move some of their operations to the Continent.
Perhaps national leaders would do better to be honest about the practices they promote and protect, and change them. Until that time Vestager has her work cut out for her.
Instead, tax competition is likely to increase. Should that fail, expect countries to engage in a trench war of corporate tax rates.