A poll earlier this week in Ireland shows a staggering amount of popular displeasure with the European Commission’s ruling last week that Apple must pay back taxes to the Irish government for supposedly negotiating what amounts to a sweetheart deal for itself:
— Dan O'Brien (@danobrien20) September 6, 2016
The EC’s ruling, which many eurocrats in Brussels have been preening over, was incredibly ill-timed. With the EU reeling from the verdict of Brexit, this kind of heavy-handedness has provided the spark for yet another potential citizen revolt in the Union.
Stuck on the fringes of Europe without a lot of natural resources, Ireland has embraced a low-tax strategy for attracting multinationals to its shores. With Brexit threatening to isolate the Irish even more from the rest of Europe, that development strategy is more important than ever to the Emerald Isle. The one-time windfall payment being demanded by Brussels from Apple—$14.5 billion—represents a huge amount of money for Ireland: It would cover health care costs for the entire country for an entire year. But the Irish understand very well that a massive one-time payment cannot make up for the long-term hit their coffers would take should corporations decide to close up shop.
This is not to say that there are no problems with corporations using dodgy tax schemes to lower their tax bills. Ireland, which had wooed multinationals for years with various less-than-transparent arrangements, has been taking the initiative since at least 2014 to shut down various tax loopholes, many favored by U.S. tech giants. The arrangement that Apple in particular is being targeted for is no longer in place according to the company’s management, for example. But charging a lower tax rate to spur investment—Ireland still has one of the lowest corporate tax rates in the Union—is also no sin.
It’s thus not hard to see how Ireland’s citizens see this broadside from Brussels’ bureaucrats as a veiled attack on their chosen model of development. The creaking welfare states of the rest of blue model Europe are desperate for revenue, and to get it, they are taxing companies and individuals up to their eyeballs—the last thing they want is for companies to find a low-tax haven inside the European Union. And so the ire at Eire has been rising.
For the moment, Ireland loves the European Union—and well it should. The Union has given it a realistic alternative to closer integration with the U.K., and has also been a lavish source of aid. (Don’t forget to listen to our latest podcast episode to get a sense of the range of Irish attitudes toward this case.) But Ireland absolutely needs a development strategy beyond just selling pints of Guinness to the occasional tourist. That reality needs to be better understood in Brussels, lest those warm feelings start turning sour over time.