The EU's Apple Ruling Is a Victory for Tax Confusion

Apple's nemesis.

Photographer: John THYS/AFP/Getty Images

The European Commission’s decision to impose a tax bill of 13 billion euros ($14.5 billion) on Apple is unjust and unnecessary. And the harm is not confined to a single company: The ruling has cast a cloud of uncertainty over Europe’s corporate-tax rules, potentially affecting all multinational investors.   

EU Competition Commissioner Margrethe Vestager says Ireland violated state-aid rules, which prohibit the selective support of particular companies. She may well be right. If so, the offenders are Ireland’s tax authorities, not Apple, which believed it was in compliance with the relevant national law.

The ruling will be appealed, and the grounds appear to be strong. A decision that looks back to taxes due 10 years before the Commission even opened its probe seems quite a stretch, if legal certainty counts for anything. Tax agreements between national governments and individual companies aren’t uncommon. If they can be reviewed after such a long delay, and with such huge financial consequences, multinational companies cannot know where they stand tax-wise.  

Meanwhile, in any event, the issue has moved on. Ireland is phasing out its controversial "double Irish" tax structure. And all the advanced economies have agreed to new standards of corporate taxation that will include country-by-country reporting by multinationals and other measures to end tax-dodging practices. Ireland retains its 12.5 percent corporate tax rate, and doubtless intends to keep its place as a tax haven for multinationals. 

There’s a further flourish. Perhaps responding to the U.S. government’s ferocious complaints about Apple’s treatment, Vestager invited other governments to examine the ruling to see whether Apple’s supposed tax debt was due to them rather than Ireland. In effect, she told the U.S. that it might get a piece. Supposing the state-aid rules were indeed broken, that would at least come closer to punishing the principal offender, Ireland’s government. On the other hand, it would compound the commission’s basic sin -- that of rendering the EU’s corporate-tax regime even more of an unfathomable mess than it was to begin with.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.