Op-Ed: The EU’s taxing problem

  • By Cal Thomas
  • Tuesday, September 6, 2016 4:45pm
  • Opinion

Economics was not one of my favorite subjects in college, so I avoided economic courses. But I do know a few things about human nature. If you tax income at too high a rate, corporations will look elsewhere for relief.

Take Ireland.

In 1991, Apple Corporation cut a deal with the Irish government so that only a certain bracket of its earnings would be taxed, giving it, writes Business Insider, “…a dramatically lower tax rate than it would have to pay in the U.S.” In return, Apple promised jobs, lots of jobs, which it provided. The company currently employs 4,000 at its Cork campus and announced in November that it will expand that number by 1,000 by 2017. It is estimated there are 18,000 Apple jobs across the country, including over 5,000 direct Apple employees.

The European Commission, which enforces EU law, now accuses Ireland of “…providing illegal state aid” to Apple, and, according to The Guardian, has chosen to clamp down “on tax avoidance schemes employed by multinationals.” The commission, having rejected Apple’s tax deal, now says the company owes $14.5 billion in back taxes to Ireland. This brought an ominous response from Apple CEO Tim Cook, who basically told the commission that they can have taxes, or they can have jobs, but they can’t have both.

The Irish government announced on Friday that it will appeal the tax bill imposed on Apple by the European Commission.

The U.S. is one of two countries that taxes corporations at the highest rate. Japan is the other. Companies are in business to make money and when they do, most expand, making more money and hiring more people. Those additional employees pay taxes to the government. More jobs create a more stable economy. Even someone without a degree in economics can understand this.

The European Commission’s attitude is that it is unfair and illegal in the minds of Brussels bureaucrats for Ireland to cut a tax deal with a corporation, even though the deal benefits that country and presumably lessens the need for more aid from the European Union. No wonder a majority of British voters, tired of being dictated to by Brussels, decided to exit the EU. If legal appeals fail, Ireland could find itself in a similar position.

This is a rare instance in which the U.S. Treasury, which has been trying to crack down on tax avoidance schemes, has found itself on the same side of U.S. corporations. As The Wall Street Journal noted, “That is partly because the U.S., unlike most other industrialized nations, imposes a tax upon repatriation of foreign profits. Any tax that Apple pays to Ireland as a result of the EU’s ruling could generate foreign tax credits that ultimately would reduce the U.S. tax the Treasury could collect.” The Journal adds, “This could matter even if Apple never brings its profits home.”

The way to fix this so that governments can still get tax revenue from corporations and create jobs with their accompanying benefits is to reduce the corporate tax rate. Problem solved.

The trouble is, asking government to accept less money from people who earn it is like asking Dracula to settle for less blood. Private businesses produce jobs and capital. Government does not create capital, but it can harm its accumulation and in so doing, harm itself.

That is the harmful path the EU has chosen to take with this ruling. Richard Bruton, the Irish government’s enterprise minister, defended his country’s relationship with Apple: “There were no special deals ever in the Irish tax code but there were different phases. There was a period when every sector exporting didn’t pay tax on their profits, there was then a period when manufacturing companies had a 10pc rate and every other sector didn’t. So there were phases when there were different sectoral approaches but always statute-based, and there were no special deals.”

Ireland has struggled more than most European nations to come back from the recession. It would be worse than shameful if Apple pulled out and thousands of jobs were lost. What would EU bureaucrats say to those who lost their jobs? Or do they care?

Readers may email Cal Thomas at tcaeditors@tribpub.com.

More in Opinion

Promise garden flowers are assembled for the Walk to End Alzheimer’s at the Soldotna Regional Sports Complex in Soldotna, Alaska, on Saturday, Sept. 16, 2023. (Jake Dye/Peninsula Clarion)
Opinion: Let’s keep momentum in the fight against Alzheimer’s

It’s time to reauthorize these bills to keep up our momentum in the fight to end Alzheimer’s and all other types of Dementia.

Jacquelyn Martin / Associated Press
Sen. Tommy Tuberville, R-Ala., questions Navy Adm. Lisa Franchetti during a Senate Armed Services Committee hearing on Sept. 14 on Capitol Hill.
Opinion: Music to the ears of America’s adversaries

Russia and China have interest in seeing America’s democracy and standing in the world weakened

Dr. Sarah Spencer. (Photo by Maureen Todd and courtesy of Dr. Sarah Spencer)
Opinion: Alaskans needs better access to addiction treatment. Telehealth can help.

I have witnessed firsthand the struggles patients face in accessing addiction care

Former Gov. Frank Murkowski speaks on a range of subjects during an interview with the Juneau Empire in May 2019. (Michael Penn / Juneau Empire File)
Opinion: Need for accounting and legislative oversight of the permanent fund

There is a growing threat to the permanent fund, and it is coming from the trustees themselves

(Juneau Empire File)
Opinion: Imagine the cost of health and happiness if set by prescription drug companies

If you didn’t have heartburn before seeing the price, you will soon — and that requires another prescription

Mike Arnold testifies in opposition to the use of calcium chloride by the Alaska Department of Transportation and Public Facilities on Kenai Peninsula roads during a Kenai Peninsula Borough Assembly meeting on Tuesday, Aug. 2, 2023, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Kenai Peninsula Votes: Civic actions that carried weight

Watching an impressive display of testimony, going to an event, or one post, can help so many people learn about something they were not even aware of

The Kasilof River is seen from the Kasilof River Recreation Area, July 30, 2019, in Kasilof, Alaska. (Photo by Erin Thompson/Peninsula Clarion)
Opinion: Helicopter fishing a detriment to fish and fishers

Proposal would prohibit helicopter transport for anglers on southern peninsula

The cover of the October 2023 edition of Alaska Economic Trends magazine, a product of the Alaska Department of Labor and Workforce Development. (Image via department website)
Dunleavy administration’s muzzling of teacher pay report is troubling

Alaska Economic Trends is recognized both in Alaska and nationally as an essential tool for understanding Alaska’s unique economy

Image via weseeyou.community
5 tips for creating a culture of caring in our high schools

Our message: No matter what challenges you’re facing, we see you. We support you. And we’re here for you.

The Alaska State Capitol is photographed in Juneau, Alaska. (Clarise Larson/Juneau Empire File)
Opinion: Vance’s bill misguided approach to Middle East crisis

In arguing for her legislation, Vance offers a simplistic, one-dimensional understanding of the conflict

A rainbow appears over downtown as residents check out rows of electric vehicles at Juneau’s EV & E-bike Roundup on Sept. 23. (Clarise Larson / Juneau Empire File)
Opinion: We should all pay more for the privilege of driving

Alaska has the lowest gas tax in the country

Opinion: Sports saves

ASAA has decided to take a vulnerable subgroup of these youth and reinforce that they are different and unwelcome