EU’s Apple Tax

It is not unusual these days to hear Europe described as a power of the past. The continent is perceived to be weak militarily. Its relative economic power is declining as Asia’s is rising. On the world stage, the European Union (EU) is thought to be fading into irrelevance due to its economic woes and its inability to speak with one voice.

Yet this narrative overlooks an important aspect of European power: Europe’s ability to unilaterally regulate global markets. Despite its economic and political struggles, the European Union exerts considerable influence over worldwide markets through its regulatory and legal framework. The world may be focused on Europe’s decline. Europe, meanwhile, is busy projecting its values across global markets, creating a world that is to its liking.

For Apple to claim they want more “reliability” regarding EU tax rulings begs disbelief. With their armies of legal and tax consultants, they have been looking to exploit every imaginable and unimaginable tax loophole for years. In the process, they have turned the European tax system into Swiss cheese.

That the EU is now striking back has corporate America up in arms. This is a bit like former United States Presidential candidate Steve Forbes constantly clamoring for “tax simplification” and the flat tax, ideally by filing annual tax returns on a postcard. According to Anu Bradford, Co-director of Columbia Law School’s Center for European Legal Studies, what made this suggestion so “rich” is that it came from the head of a family that has made a lifelong sport of finding every tax loophole it can find. Punching loopholes into the tax code via armies of lobbyists and then complaining about the complexity of the tax system is, at best, disingenuous.

Anu Bradford noted that what really annoys corporate Washington and their  lobbyists is that the European Union in Brussels evidently has too much backbone. It doesn’t just fold in front of a powerful lobby. That makes the European capital very different from the United States one. Via the cancer of campaign finance, U.S. corporations and their lobbyists own Washington. They expect Brussels to fit into the same pattern.

Many noted economic analysts adamantly argued that if globalization is  to have any popular support in the future, the big multinationals simply cannot go on turning the global tax system into Swiss cheese. According to them, reining them in is a key condition for the future legitimacy of globalization. This may displease the hordes of lawyers, accountants and others who make a spectacular living out of what is euphemistically called “tax optimization.”

The European Union is now making a deliberate effort to push back on such shenanigans. It basically says that major corporations colluding with all too pliable governments isn’t acceptable European practice. The European Union is correct. It doesn’t suffice any longer to have more OECD studies and standards calling for more tax fairness. The rubber finally has to meet the road.

True, countries like Ireland, Luxembourg, the UK and the United States, all tax shelter havens, may have to find new ways to make a living. So what? Consider the case of Switzerland. It’s previous precious business license for tax evasion, via its “exclusive” private banks, was also effectively shut down notably by United States enforcement measures. Keeping the multinationals from endlessly gaming the system is the next step in reining in crass inequities.

Paul Goldschmidt, Chairman of the European Affairs Department, Thomas More Institute stead that the United States government simply cannot always assume to be the arbiter of the behavior of other nations and their firms and at the same time consider itself above the law. According to him, that ultimately smacks of an imperialist mindset. The problem is that the United States will encounter more resistance on its future initiatives if it factually acts in a manner where United States firms are effectively held to lower standards than foreign ones.

Paul Goldschmidt further noted that the related effort, to try casting people like myself who point out these massive inconsistencies, as advocates of anti-Americanism isn’t just a cheap shot. It’s actually a sign of despair and an implicit admission of a lack of good arguments. Intended as a killer argument, it actually achieves the opposite purpose. Ironically, by raising this point, CEOs like Apple’s Tim Cook unintentionally create a self-fulfilling prophecy. These companies will do everything to run away from their responsibility toward the democratic societies out of which they extract the vast plethora of their gargantuan profits.

Europeans are also painfully aware how many former senior Obama officials, not to mention those from the Clinton machine complex who made the move before them, have already moved over to be employed by the multinationals complex. Silicon Valley firms have become the “new” Wall Street. After the global financial crisis, moving to the employ of investment banks just isn’t as prestigious and remunerative as it used to be.