Last month’s Apple judgement strikes at the heart of Irish capitalism. Since the late 1950s, Irish policy makers have used incredibly low corporation tax rates to encourage foreign companies to invest here. Since the 1990s, this policy has increasingly meant offering the Irish Financial Services Centre (IFCS) as a global hub for tax evasion. Ireland is now little more than a glorified money launderer.
This is the judgement of the European Commission in relation to two sweetheart deals made with Apple in 1991 and 2007. These deals allowed Apple to incorporate two legal entities that had no other purpose than to receive profits from sales outside Ireland and the USA. The profits were made around the world, before being declared in Ireland and moved off shore to be ‘tax liable nowhere’. From 2003-2014 the amount of profit was €104 billion and the rate of tax paid was often as low as 0.005%.
This is the very definition of state aid no matter how loudly the establishment protest. Imagine the shoe was on the other foot. Every worker in Ireland set up a shell company to allow them to route their income through France and then off shore to pay no taxes. How might the Irish Revenue Commissioners respond? Would the state allow the French to say that they were merely applying domestic taxation laws – obviously not?
This is a clear case of the Irish rich beggaring their European neighbours and getting caught. This will cause them major problems.
In order to attract US multinationals the Irish rich have historically traded on two big advantages – the lowest corporate tax rate in the OECD and unfettered access to European markets. Over the last forty years they have managed to remain at the heart of the European Union even as they captured investment at the expense of their neighbours. Business taxes are considerably lower here than in France or Germany and everyone knows it.
This explains why the Irish elites were so willing to accept €64 billion in illegitimate European banking debt. When the ECB governor, Jean Claude Trichet, stated that a financial bomb would go off in Dublin he was appealing directly to the naked self-interest of the Irish capitalist classes. The basic calculation was very simple – force your workers to pay off our banking debts or lose your cherished place in the European Monetary Union.
The Irish establishment duly obliged, slashing billions from wages and welfare whilst reminding the population of the need to support our European partners. The resulting austerity pushed Ireland to the bottom of the OECD leagues tables in terms of child poverty, deprivation and inequality. This was a small price to pay for the rich themselves, however, who were roundly applauded for their ability to make the population pay.
This time around it is the interests of the rich that are being threatened. By finding against Ireland in a case of state aid, the EU is sending out the message that their ‘beggar your neighbour’ tax haven policies are coming to an end. This puts the Irish rich into a bind. Either they remain in the EU and lose most of their tax advantages, or they leave and risk losing multinationals worried about access to European markets.
This explains why a government so willing to support the EU during the bank bailout is now so willing to move against them. Michael O’ Leary captured their mood when suggesting that Ireland should tell the EU to f**k off. Other less abrasive voices have backed this sentiment with calls to defend the integrity of the Revenue Commissioners – the very people who never lifted a finger to stop the rich avoiding their taxes during the Ansbacher scandal.
Since the size of the judgement became known the establishment have been engaged in wholesale lying. Between €13-€19 billion would go a very long way in a country ravaged by austerity, meaning that the case for refusing the money had to be constructed by any means necessary.
Michael Noonan immediately claimed that EU was picking on Ireland; that this was a one-off case and that the money could only be used to pay down the national debt. In reality, this is one of more than a thousand cases; the Commission is looking at others involving Ireland and the state can spend them money on whatever it likes.
Noonan also claims that this ruling constitutes a threat to our 12.5% corporate tax rate when the ruling actually asks the state to collect –you’ve guessed it – 12.5%. For now the state has kicked for touch, establishing an appeal that will last for years. But from here on out, they will have significant problems as every cut will rightly be seen as avoidable had they chosen to take this money.
When the EU come back looking for water changes in 12 months’ time, it will be virtually impossible for Fine Gael to say there is ‘nothing we can do’. Apple has created an ongoing problem for the Irish establishment that will only increase with the fullness of time.