{"id":80855,"date":"2016-10-10T12:00:55","date_gmt":"2016-10-10T11:00:55","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=80855"},"modified":"2016-10-07T14:31:21","modified_gmt":"2016-10-07T13:31:21","slug":"apple-brussels-and-irelands-bruised-sovereignty","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2016\/10\/apple-brussels-and-irelands-bruised-sovereignty\/","title":{"rendered":"Apple, Brussels, and Ireland\u2019s Bruised Sovereignty"},"content":{"rendered":"

\"Yanis<\/a>28 Sep 2016<\/em> \u2013 Despite their unequivocal Europeanism, the Irish have been serially mistreated by the European Union.<\/p>\n

When Irish voters rejected the Treaty of Lisbon in 2008, the EU forced them to vote again until they delivered the \u201cright\u201d outcome. A year later, when private Irish banks imploded, threatening their (mainly) German private creditors with severe losses, Jean-Claude Trichet, the European Central Bank\u2019s then-president, immediately \u201cinformed\u201d the Irish government that the ECB would shut down ATMs across the Emerald Isle unless Ireland\u2019s unsuspecting taxpayers made the German banks whole.<\/p>\n

Ireland acquiesced, its public debt ballooned, emigration returned, and the country remains bruised and despondent. With the EU still refusing meaningful reduction of a debt burden unfairly borne by the younger generation, the Irish remain convinced, correctly, that the EU violated their sovereignty on behalf of foreign bankers.<\/p>\n

Ireland\u2019s greatest weapon against the ensuing debt deflation was its ability to attract US-based tech giants, by offering them a combination of EU law, a well-trained English-speaking workforce, and a 12.5% corporate-tax rate. Though the shell-like subsidiaries of global tech conglomerates have little positive impact on most households\u2019 income, Ireland\u2019s establishment is proud of its links with the likes of Apple. Now, the European Commission is jeopardizing the government\u2019s special relationship with Apple by demanding that it claw back \u20ac13 billion ($14.6 billion) in taxes from the company.<\/p>\n

Is the Commission\u2019s latest intervention another example of EU bullying, in violation of Ireland\u2019s sovereignty? Comparing Trichet\u2019s 2009 intervention and the current standoff over Apple holds important lessons beyond Ireland and, indeed, Europe.<\/p>\n

In the eurozone\u2019s early years, German financial institutions channeled a torrent of capital into Ireland\u2019s commercial banks, which then lent it to real-estate developers. The ensuing property bubble resulted in white elephants in Dublin\u2019s financial district, row upon row of new blocks of flats in the middle of nowhere, and a mountain of mortgage debt. When the bubble burst after 2008, land prices collapsed, debts went bad, and Ireland\u2019s private banks failed.<\/p>\n

The ECB, in an affront comparable to British behavior during the 1845-52 Potato Famine, instructed the government to invoke \u201cfinancial stability\u201d to force Ireland\u2019s weakest citizens to repay every euro the defunct private banks owed to German creditors. Financial stability was obviously a smokescreen: taxpayers were forced to repay even the debts of a bank that had already been closed (and thus systemically irrelevant).<\/p>\n

The roots of the Apple deal are older than the ECB. In 1980, a young Steve Jobs visited an Ireland<\/a> eager to escape underdevelopment. Apple eventually created 6,000 jobs in the country, in exchange for a sweetheart tax deal allowing it to shield its European revenues from taxation by recording them there. To this day, the proceeds of every iPhone sold in Paris or in Stockholm (net of its Chinese assemblers\u2019 production costs) go to Apple\u2019s Irish subsidiary Apple Sales International. As a result of the original Apple-Ireland deal, ASI pays a miniscule tax on these earnings, effectively exempt from the ultra-low 12.5% corporate-tax rate.<\/p>\n

This arrangement also required the usually vigilant US Internal Revenue Service to play along. ASI\u2019s profits stem from Apple\u2019s intellectual property (IP) rights, which are based on research and development conducted exclusively in the US (most of it underpinned by federal government funding). These profits should, therefore, be taxed in the US.<\/p>\n

Curiously, the IRS is choosing not to enforce Apple\u2019s obligation to pay tax on its profits from US-sourced IP returns. Instead, Apple charges ASI a symbolic fee for allowing it to profit from Apple\u2019s IP rights, for which it pays a tiny tax to the IRS. Meanwhile, ASI is allowed to keep, in Ireland, profits representing close to two-thirds of the revenue from the sale of every Apple product sold outside the US. As a result, Apple has amassed untaxed cash reserves of up to $230 billion.<\/p>\n

Unlike in 2009, the Irish government is protesting the EU authorities\u2019 recent Apple ruling, pointing out that tax policy is in the purview of national governments, not the Union. And, in a recent joint letter<\/a> to German Chancellor Angela Merkel and the EU\u2019s other 27 national governments, 185 American CEOs alleged that the EU had over-reached yet again, resulting in a \u201cself-inflicted wound\u201d for Ireland\u2019s and Europe\u2019s economy.<\/p>\n

But they are wrong: Ireland\u2019s sovereignty is not an issue here. Apple would not have based itself in Ireland were it not for the EU\u2019s single market, a commons that requires common rules. One of these rules is that governments cannot offer aid to some companies that is not available to others.<\/p>\n

Suppose, for example, that the Greek government, seeking to attract 6,000 jobs to its ravaged economy, offered Apple a subsidy of \u20ac110,000 per job per year, or \u20ac660 million. Over two decades, the total subsidy would come to slightly more than \u20ac13 billion. Were the EU to permit Greece to offer Apple such a deal, the other EU member states, including Ireland, would revolt.<\/p>\n

Suppose further that the Greek government proposed waiving corporate tax for 20 years on all revenue Apple earned in the rest of the EU but booked in Athens \u2013 say, \u20ac13 billion. The European Commission would then have a duty of care to the European commons to demand that Greece immediately recoup that \u20ac13 billion \u2013 exactly as it is telling Ireland to do today.<\/p>\n

Every time the EU acts as a colonial usurper, as it did in 2009, it undermines the legitimacy of its good and proper actions and strengthens the xenophobic, anti-European \u201cNationalist International<\/a>.\u201d Europe\u2019s only beneficiaries, much to the delight of Vladimir Putin and Donald Trump, are isolationist Brexiteers, the far-right Alternative for Germany, France\u2019s National Front, and illiberal governments in Poland, Hungary, Croatia, and elsewhere.<\/p>\n

The lesson to be learned from comparing Trichet\u2019s 2009 intervention with the European Commission\u2019s current stance on Apple is simple: Europeans\u2019 real enemy is free riding by the few on the backs of the many. Without common institutions, Europeans cannot be defended from the exploitation and anti-social practices that big business and its political agents portray as economic common sense.<\/p>\n

Trichet compromised Ireland\u2019s sovereignty to facilitate German bankers\u2019 free ride on the shoulders of Ireland\u2019s taxpayers. As restitution, the ECB should take on its books part of Ireland\u2019s public debt. But the EU must not allow Ireland to abuse the European commons by offering Apple a deal that no other member state could. The right response to past injustices is to recover sovereignty in a Europe where the powerful \u2013 whether German bankers or American smartphone makers \u2013 are prevented from preying on the weak.<\/p>\n

__________________________________<\/p>\n

Yanis Varoufakis, a former finance minister of Greece, is a professor of economics at the University of Athens.<\/em><\/p>\n

Go to Original \u2013 project-syndicate.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Is the Commission\u2019s latest intervention another example of EU bullying, in violation of Ireland\u2019s sovereignty? Comparing Trichet\u2019s 2009 intervention and the current standoff over Apple holds important lessons beyond Ireland and, indeed, Europe. With the EU still refusing meaningful reduction of a debt burden unfairly borne by the younger generation, the Irish remain convinced, correctly, that the EU violated their sovereignty on behalf of foreign bankers.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51],"tags":[],"class_list":["post-80855","post","type-post","status-publish","format-standard","hentry","category-europe"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/80855","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=80855"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/80855\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=80855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=80855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=80855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}