Every member country tries to game the system
The Irish government has just lost 13 billion euros — and it couldn’t be happier about it.
The money was in the form of tax that the European Commission ruled was owed by Apple to the Irish government.
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Dublin (and Apple) disagreed, insisting that the tax break was legitimate and that no one owed anyone anything. The Commission, however, was adamant that the tax break amounted to illegal state aid and so ordered Apple to pay it back to the Irish government with interest.
Obviously, the Irish government — like all governments — could really do with €13 billion right now. But being compelled to take the money would be a body-blow to the Republic’s status as one of the EU’s tax havens, which, in the long-run, is worth a lot more.
There are those in the Commission who would dearly love to establish a level-playing field on tax within the single market — and their defeat today will embolden efforts to abolish the internal tax havens.
According to a report in the Financial Times, the plan is to use Article 116 of the EU treaty which is about eliminating Single Market “distortions” caused by “law, regulation or administrative action in Member States”. The wording looks vague enough to include tax policy. Crucially, using this mechanism to strike down cushy tax deals would be subject to Qualified Majority Voting i.e. the tax haven countries wouldn’t have a veto.
The likely targets, including Ireland and the Netherlands, would of course resist and have ways of hitting back — for instance by blocking or diluting the post-Covid recovery funds for the worst hit EU countries.
Once again, we can see the EU for what it really is: a giant game of beggar-my-neighbour in which each player uses every means at its disposal — whether it’s gaming the Single Market, exploiting the single currency or fighting over the EU budget — to extract as much value as possible from their friends.
It’s a game that the UK habitually lost, which is why we left the table.