EU Economics

John Robson: Apple tax decision shows that Britain was right to leave the EU

Mark Lennihan/The Associated Press files

Remember Robert Conquest’s Third Law of Politics? “The simplest way to explain the behaviour of any bureaucratic organization is to assume that it is controlled by a cabal of its enemies.” Case in point: the European Union recently ordered Ireland to collect €13 billion ($18.72 billion) in taxes that Apple doesn’t even owe.

There’s an interesting side issue that’s perhaps not obvious in North America, where it seems that Apple invents things and everybody else plays catch-up with, or dies trying. (Yes, I have a Windows phone. Sigh.) But while iOS has a smartphone market share of more than 40 per cent in the U.S., and reasonably similar numbers in Canada, Australia, Japan and the U.K., it is under 20 per cent in the other big European economies and China. In Latin America, it’s under 10 per cent.

With the EU also after McDonald’s and Amazon, there’s a strong scent of stale Euro anti-Americanism in the air. Especially given the eurocrats’ open, scornful hostility to the “Anglo-Saxon” model of liberty and entrepreneurship, rather than wise elite state guidance. Hence the stubborn insistence that the EU will continue to champion over-governed, overly bureaucratic, unaccountable big government as though nothing had happened on June 23. (Brexit? What Brexit?)

In the immediate aftermath of that vote, there was much gloating at sausage-fingered xenophobic United Kingdom Independence Party yobs and predictions that the pound and the British economy would tank. There were even calls for Ireland to swallow Ulster, which had voted to remain. But then it dawned on people that Britain has a far healthier economy than most EU countries. Hence the Aug. 23 suggestion by the head of the Flemish government in Belgium of a “North Sea Union” free trade bloc that would include the U.K. to cushion the shock of the Brexit, not on Britain, but on its European trading partners. So now the EU uncorks this ruling.

The Apple tax decision makes staying in the EU seem like a loser choice.

Well, not just it. The EU is doubling down on opening borders in response to the migrant crisis. And recently Swedish Prime Minister Stefan Leofven warned with a straight face that if Britain cut corporate taxes it would make Brexit talks “more difficult,” apparently not realizing a major reason the talks are looming at all is because of the EU’s obsession with taxing and regulating. That Leofven patronizingly added that, “Tax cuts are not the future,” did not help.

Now the European Commission (EC) says Ireland’s favourable tax regime is a state subsidy and under EU rules constitutes “illegal aid.” I have no use for tax subsidies, but Ireland, long an economic backwater, turned its affairs around in the 1990s with a program of low taxes and subsidies to corporations.

Parts of the program and their results were better than others. But despite a rough ride since the 2008 financial crisis, to tell the Irish that they can’t experiment with different policy approaches, even if it forces them to accept the enterprise-strangling policies that have given France 24 per cent youth unemployment and Spain about 50 per cent, might cause them to ponder following Britain out the door.

A statement from Apple CEO Tim Cook said the EC ruling “is effectively proposing to replace Irish tax laws with a view of what the commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.”

Well, yes. But to the EC, it’s a feature, not a bug. Having driven the U.K. out by its addiction to unaccountable, stifling excessive government, the EU goes after Ireland. Exactly as its critics would expect and, frankly, its enemies would want it to.

As soon as the Apple ruling came down, a spokesman for British Prime Minister Theresa May said, coyly avoiding naming names, “Britain is open for business, we welcome any company wishing to invest in Britain and Britain’s workforce.” Her Majesty’s Treasury added, “The U.K. is open for business and we welcome any company wishing to invest in Britain, but we have always been clear that companies that do business here must pay U.K. taxes.” Which prompted Russian President Vladimir Putin’s propaganda media outfit RT to sneer: “Britain flutters eyelashes at Apple following European Commission tax ruling.” But you don’t want Putin on your side.

Meanwhile, the Irish government is considering appealing the ruling, or perhaps collapsing into chaos as the unstable coalition government resulting from its proportional representation-single transferable vote system can’t cope with clear-cut policy choices. The whole thing couldn’t have been better designed to make staying in the EU seem like a loser choice and the British look smart to have been first out, clutching their traditional parliamentary self-government.

One can devise a great many explanations for the EU’s conduct, including arrogance and stubbornness. But Conquest’s Third Law packages them all neatly. And when you’re a walking, even swaggering illustration of it, you really should think twice. Before somebody else does.

National Post

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