With Britain leaving the EU, prepare to see a weakening of the current climate that favours large multinationals. In this case, US tech multinationals.
For some, this betokens the beginning of the end of the EU as an enormous levelling machine for international, read US, business.
For Brexiteers, no doubt, the EU is now reasserting its true colours and will eventually die of socialist bureaucratic inertia, now that Britain’s red tape cutting instincts will no longer lend its staying hand.
Poor Ireland, which has sheltered behind Britain to carve itself a niche as a low tax tech corporate haven for American tech firms: Google, Apple, Facebook: all have European bases here. As such, they have had access to the European single market from a very convenient tax haven.
Dublin’s economy has profited handsomely. Celtic tiger and all that. So have the coffers of these US tech companies. Inasmuch in that these companies have ploughed the proceeds into innovation, the global consumer has enjoyed the fruits of the internet and tech revolutions.
But now it’s crackdown time from the EU. CNN is reporting that the tax arrangements between Amazon, Apple, and others, and the Irish government are being probed by the European Commission because of alleged sweetheart tax deals that may have amounted to illegal state aid. Apple, furious, has said it may be facing a decade’s worth of back taxes to the Irish state. Could amount to billions of dollars.
The US Treasury Department, in a rather odd intervention, claimed that the affair isn’t just between a US company and another jurisdiction, but that the US taxpayer will have to take the hit. Since companies paying extra taxes in the EU will eventually claim that spending as a deduction on US taxes. Perhaps the logic of the argument is less of import than the fact that the US government is getting involved. Washington is emitting a threatening growl.
Why did not the Remainers make this argument when they had the chance? Britain acts as a tension defuser between the two powers, Europe and America. Will historians mark this down as the beginning of the New Cold War between Europe and the United States?
Well, maybe not. But certainly, politics has become interesting again.
The EU probe has its origins in a leak from 2014 showing how big companies shop around EU states to get the cheapest tax rate possible. The EU public lose tens of billions of euros in revenue every year.
Tax sovereignty is something EU states worry about. At the same time, they don’t like these beggar-my-neighbour policies where EU states compete with each other to “prostitute” themselves to international corporations, who can then pick and mix, divide and rule: take the best of what’s on offer. Member states jealously guard tax information; there is little sharing. So no one really knows what’s going on.
The EU says it is not an attack on the US: Italian carmaker Fiat has also been targeted, and a Belgian tax scheme was unpicked this year.
My guess is that this kind of populism strikes a chord among electorates. Neoliberalism, globalisation, single market, call it what you will – it is a bit unpopular these days. If the tech giants could prove that paying more tax significantly degrades the quality of their offerings, maybe opinion will turn.