Over the past few weeks, a major international struggle between the European Union (EU) and Apple has captured headlines. The EU made a decision that Apple was using Ireland as a “tax haven” and avoided paying taxes that they would have paid by basing themselves in other countries in Europe. According to EU calculations, Apple now owes over $14 billion in taxes, and both Apple and Ireland are contesting this claim. Despite the response from both company and country that this ruling is unfair, the EU refuses to back down from the issue. This ruling clearly violates the national sovereignty of Ireland and global economic freedom.
First, through this decision the EU has overreached into the national sovereignty of Ireland. Rather than praise Ireland’s tax laws that spurred economic investment in a country that used to be one of Europe’s poorest, the EU seeks to stifle prosperity and innovation. Rather than embrace globalization, foster competitiveness for business, and promote economic freedom, the EU wishes to impose its own world view of fairness by determining what it thinks is best and fair for each country in the EU.
The overreach into Irish national sovereignty is dangerous to the investment economy that Ireland has built. According to the Forbes Best Countries for Business list of 2015, Ireland is ranked #4 in the world in opportunities for businesses. The report notes that Ireland’s low corporate tax of 12.5% encourages investment by foreign businesses, which has now become a central component of the economy in the country. After a few years of unstable markets after the financial crisis of 2008, Ireland’s economy has bounced back due to foreign investment. In fact, last year the GDP rose by 7.8%, while the eurozone overall only saw an increase of 1.6%. Since the country has relied on foreign investment and business over the past few years, the EU threat to industry could cause businesses and investors to pull out, drastically hurting the economy.
The EU’s decision is also an attack on U.S. firms that dominate the global market. The U.S. has some of the most innovative and entrepreneurial firms in the world, especially within the tech industry. Europe has not been able to keep pace with innovation and global competitiveness being offered by U.S. companies. Thus, it seems the EU wishes to punish U.S. firms that expand to European markets, rather than encourage investment. Retroactively punishing companies and countries for seeking to advance businesses and the economy is not the way to promote free trade and globalization. This decision, if not overturned, will deter outside investment in Europe, killing jobs and economic prosperity for citizens of many European countries.
There are many factors that go into a country’s economic success, and Ireland tapped into those factors to build a successful and prosperous economy. Both Ireland and Apple agree that no taxes need to be paid, yet the EU wants to force Ireland to collect those taxes from Apple. Groups like Citizen Go and Austrian Economic Center have launched petitions to protest the ruling, citing the danger it poses to the sovereignty and economic freedom of EU nations. Other countries in the EU should lower their tax rates to be competitive with Ireland rather than rely on the EU to level the playing field. The EU should respond to Ireland’s appeal by overturning their ruling.
Photo Credit: Kevin T. Houle