In taking a bite out of Apple Inc., the beleaguered bloc has gone where the U.S. feared to tread and demonstrated that it still has clout when it comes to taking on corporate giants. The move is a powerful reminder to the U.K. that in patrolling the terms of access to its half a billion consumers, the EU punches its global weight.
There’s something else as well. By ordering the world’s richest company to pay Ireland a record 13 billion euros ($14.5 billion) in back taxes, it’s given the U.K. a chance to reinvent itself as a fiscal paradise for multinationals in a post-Brexit world, reports Bloomberg.
“EU rules will not be binding in the U.K. and it’s interesting to see how it will affect firms,” said Georgios Petropoulos, research fellow at the Brussels-based policy group Bruegel. “Will firms from Ireland prefer to move to the U.K. where the European Commission does not have any power to prosecute them there?”
While the EU flexes its muscle, the U.K. is trying to work out how it can participate in the single market as an outsider. The 28-nation alliance may clash on a medley of issues from budgets to immigration, but its executive arm is consistent about coming down hard on anything that smacks of state aid or unfair competition.
For evidence, look no further than its antitrust fights with Microsoft Corp. in the 1990s, which it won, or those today against Google Inc. Then and now, the European Commission seems undeterred by what wealth these tech giants bring to the economy. Europe is Apple’s biggest market after the U.S. and China.
The Referee
“This is another example of how the EU helps to stand up to massive international corporations,” Susan Kramer, the economic spokesperson for the U.K.’s Liberal Democrats, said in a statement. “It’s perfectly possible for a company like Apple to bully Ireland, or even the U.K., into sweetheart deals -- but the EU acts as a referee.”
The readiness to force U.S. companies to pay up strikes a different, more populist note, at a time when the EU has rarely had so little support among voters from London to Athens.
Home to 500 million consumers, the EU will remain a big market with or without the U.K., its second biggest economy. For Kramer, a pro-EU voice, the case of Apple underlines the risk that Britain will become “a multinational tax haven cut adrift in the mid-Atlantic.”
EU’s Reach
Apple is just the latest company to fall foul of the European regulator, which has gone where the U.S. has feared to go. Rather than issue fines for illegal state subsidies, the EU can order nations to claw back aid, such as unpaid taxes, from the recipients.
In January, the Commission ordered Belgium to recover about 700 million euros in what it called illegal tax breaks to 35 companies including BP Plc. Last year, Starbucks Corp. was ordered to pay 30 million euros in back taxes to the Dutch government. The EU is also investigating Luxembourg’s tax agreements with Amazon.com Inc. and McDonald’s Corp.
Apple and the Irish government say they will appeal the EU ruling and the U.S. have complained that its companies are being unfairly targeted. The EU, if anything, is likely to double down.
“We live in a world now where companies operate across borders of national states so in terms of competition, the European Commission is above everything,” said Petropoulos. “This is not the end of decisions against digital companies; we will have more of this.”