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How the EU's Ruling on Apple Explains Why Brexit Happened

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How the EU's Ruling on Apple Explains Why Brexit Happened

By Max Bearak, The Washington Post | Updated: 31 August 2016 10:01 IST

On Tuesday morning, the governing body of the European Union ruled that one of its members, Ireland, had broken its rules by allowing US-based Apple to pay a tax rate of 1 percent - and sometimes as little as .0005 percent. Ireland's regular tax rate is 12.5 percent, and the EU's rules state that members can't give special benefits to individual companies, even if it is the most highly valued company in the world.

Under the EU ruling, Apple would be required to pay Ireland more than $14.5 billion in back taxes. Both Apple and the Irish government plan to appeal.

That's is a huge amount of money for a small country like Ireland, which suffered terribly after the 2008 financial crisis and required a massive bailout from the EU. Many in Ireland are salivating over what kind of public infrastructure or personal tax breaks $14.5 billion could be spent on. The sum is roughly equal to Ireland's entire health budget, to put it in perspective.

Others, however, see the ruling as exactly why Ireland, just like the United Kingdom did with its Brexit vote, needs to leave an interventionist, anti-sovereignty European Union.

To put the question a different way: Did Apple, in collusion with the Irish government, rip off the Irish public by arranging a huge tax break? Or did the European Union just undermine Ireland's economic model and strip the country of its competitive advantage, risking Ireland's long-term growth?

Much of the debate across the Irish Sea in Britain during the lead-up to their referendum on EU membership in June centered on the idea that bureaucrats with no allegiance to Britain were sitting in Brussels and writing their laws. Proponents of a "Brexit" argued that leaving the EU would allow the country to "take back control" of its economy and borders.

After the EU's ruling on Apple and Ireland on Tuesday, one of the most outspoken Brexit leaders, Nigel Farage, tweeted that the EU was "anti-democratic" and "doomed," and included a video of him on a television show saying "Across the whole continent, people are saying, 'Why are our laws being made somewhere else?'"

Others began using the hashtag #Irexit, or argued that it was the EU, and not Ireland, that had broken its treaty obligations to its member-state.

Mehmet Simsek, Turkey's deputy prime minister, even took the opportunity to suggest that Apple shift from Ireland to Turkey, which isn't a EU member, where he'd be "happy to provide more generous tax incentives."

And despite the promise of an unprecedentedly large injection of tax revenue, the Irish government plans to appeal the ruling.

"This is necessary to defend the integrity of our tax system, to provide tax certainty to business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation," Michael Noonan, Ireland's finance minister said in a statement.

Apple will also appeal. At the core of their argument is a denial that they got special tax rates unavailable to others.

"The European Commission has launched an effort to rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process," read part of a statement from Apple's chief executive, Tim Cook. The ruling, he said, would have a "profound and harmful effect on investment and job creation in Europe."

"Using the Commission's theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed," argued Cook.

Ireland's second and third-biggest parties seemed to align with the ruling Fine Gael party in opposing the ruling. Both the Fianna Fail and Labour parties spokespersons stated that it was counter to their understandings of Ireland's ability to set its own tax rules, and expressed worry that should the appeals fall through, multinationals would lose faith in Ireland as a destination for investment. Apple employs around 6,000 people across Ireland, and made overtures that those jobs would be kept there.

Much further to the left on the political spectrum, the Social Democrats, Ireland's newest political party, echoed the resentment toward Apple that many Irish citizens expressed throughout the day on social media.

"While Small and Medium sized enterprises, which employ seven out of every 10 people in the private sector, struggled throughout the downturn, many going to the wall, this multinational giant was paying the bare minimum in tax," said a statement released on their website.

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Further reading: Apple, European Union, EU, Ireland

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