Matthew Lynn

Apple has struck a blow against the EU’s out-of-control federalists

Apple has struck a blow against the EU's out-of-control federalists
European commissioner for competition Margrethe Vestager (Getty images)
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A massively profitable American technology giant that pays small amounts of tax on vast profits, while massively over-charging for products that quickly become obsolete. Apple is a hard company to love, and an unlikely champion of anything apart from its own bottom line. And that might explain why many people instinctively cheered when the European Union slapped a massive 13 billion euro (£11.8bn) tax bill on Apple. Surely it was about time the company was cut down to size?

Well, hold on. It now turns out the EU was wrong. The General Court of the EU today overturned the decision after the Irish (and Apple) appealed against it. It will probably go up to a higher court. For now, however, the EU, and especially its star commissioner Margrethe Vestager, who has been leading a one-woman campaign against the American tech giants, have been exposed as dangerously out-of-control. In truth, even if 13 billion euros is a lot of money – which it is – this is about far more than just tax.

The EU has been using tech regulation, and competition policy, as a cover for a naked, federalising power grab. Let’s take the Apple case as an example. The company is perfectly entitled to base a lot of its operations in Ireland, which happens to have a very low corporate tax rate (just 12.5 per cent). Low taxes are one of the ways that what used to be a slightly damp island on the far west of Europe has made itself one of the richer countries in the world. 

Ireland was always perfectly happy with Apple’s taxes. It paid what it owed in full. And Apple was quite happy to base itself there, and employ lots of people. And then the EU came along, and tried to redefine that as 'state aid' and slapped it with a huge bill. It is hardly the first time that has happened. The Commission has already lost a similar case against Starbucks, and Google is quite rightly appealing against the billions in fines that have been imposed upon it (its lawyers must be smiling this morning).

Whether you happen to approve of big American companies or not isn’t really the point, whatever the EU’s defenders try to maintain. In reality, under the existing treaties, aside from VAT, Ireland is allowed to charge any taxes it wants. If the Commission wants an EU-wide corporate tax it should argue for it, and change the treaties openly. Instead, it has been trying to do it in secret, and with lots of spin, but, as it has just discovered, without any legal basis.

The EU often tries to portray itself as a 'rules-based' organisation. But it is increasingly acting outside the law. It has now lost a whole series of key cases, and in its own courts as well. 

Maybe Apple pays too little tax, and maybe it doesn't. Likewise, maybe Ireland's taxes are too low, and maybe they aren't. It is perfectly fine to have an argument about that. But surely those issues should be debated democratically, and decided by the voters, and not by an unelected commissioner who last time she faced the voters, as leader of Denmark’s Social Liberals, won a staggering 9.5 per cent of the vote (soon after which Vestager was shunted off to Brussels to wage war on tech)? 

Apple has saved itself £12bn, which is nice for its shareholders, even if we won’t hold our breath for a discount on a new iPhone. But far more importantly, it has saved Ireland, and much of the rest of Europe, from an out-of-control group of federalists in Brussels.

Written byMatthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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