How the EU turned on Ireland’s low-tax project

00:00 06:44

Ross Clark has narrated this article for you to listen to.

First, the good news. The Irish government is about to receive a €13 billion windfall in the form of back taxes from tech giant Apple, after the European Court of Justice (ECJ) ruled against the company. That should pay for a good few social homes in a country that has an even bigger housing crisis than Britain’s. It could even go some way to providing universal free public healthcare (at the moment most adults have to pay something, even at public hospitals).

Why should countries which have been successful at managing their finances be forced to jack up tax rates?

Now the bad news. Ireland doesn’t actually want to receive the money any more than Apple wants to pay it. It has spent millions of euros fighting the European Commission (EC), which initiated the case. Ireland’s fear is that while a windfall might help its coffers in the short term, it will lose out in the long term if it is not allowed to attract businesses by offering them low tax rates.

But hang on, isn’t corporate taxation, like personal income tax, supposed to be a matter for EU member states, not Brussels? Not according to the EC, which decided in 2016 that the low tax rate paid by Apple in Ireland, where it has its European HQ, amounts to unfair competition. The EU argues that the arrangement between the Irish government and Apple – which it claims involves an effective tax rate of less than 1 per cent – was not on offer to all companies, and therefore amounts to a sweetheart deal: illegal state aid, in other words.

Given the billions of euros doled out every year in aid by the EC to farmers and other favoured sectors, it is hard not to laugh at this outbreak of high moral principle.