There's a row brewing between the EU and corporate America, with the US government having to look after its own, whatever the merits either way. In fact the opening salvoes of the row have already started with the EU Commission declaring that Apple
is required to pay back-taxes to the EU, via Eire, of £11 billions. While everyone waits for the UK Prime Minister, Theresa May, to trigger Article 50 and begin the formal negotiations to leave the EU, the UK is more in a position to observe from afar.
The UK remains a member of the EU for the next two years, but at the same time it will be detaching itself from EU laws and declarations.
What the Apple row with the EU illustrates is how wealthy global corporations will use clever accounting to position
themselves to pay as little, or even no tax. One method is to place their headquarters far from their home base in their country of origin. Thus by establishing their headquarters in countries who fall over themselves to offer very favourable tax arrangements.
This works both for the corporation and the country it chooses to record it's profits from.
This may not be breaking any laws, but it's a way of interpreting them in a way that benefits the corporation. Like a software program, all the rules work normally,
but then someone tries a different approach and gets more than was intended. The UK is now bringing in a law that makes the corporation's accounting firm equally liable for tax evasion. Thus not only is the tax recovered from the corporation, but the accounting
firm has to pay the same amount again. It's intended to be a double blow.
The EU says that Apple has broken EU laws by obtaining a special arrangement with the Irish government, when it first placed its headquarters there. Ireland gained inward investment
and job creation, while Apple received a softer view on its overall profits. It was able to divert a significant amount of profit out of the tax system by creating a virtual headquarters, that had no physical presence. As a consequence its tax went as low
as 0.005%, equivalent to £50 tax paid on every £1 million of profit made. This wasn't clever accounting, this was using the tax arrangement that the Irish government had agreed to.
Ireland operated as if it was not a member of the EU when
agreeing to Apple's tax arrangements. Luxembourg has done the same with Amazon and Starbucks didn't point out that it too did not have its tax arrangements closely examined – until recently, when it paid some back-tax. Ireland doesn't want the missing
tax, but it has to abide by the EU Commission's dictate. If it cannot extricate itself and Apple from this latest ruling, it could suffer financially.
This doesn't cut any ice with the EU Commission. After all it's practically made Greece bankrupt by
forcing it to comply with Euro laws that do not work the same in each country. So how was it possible for Ireland to ignore EU rules until now? This is just one of the examples that caused the referendum in Britain to vote to leave the EU. The vote would not
have gone fro Brexit, if the EU Commission was not so biased towards certain EU countries and intransigent to any change.
Since Brexit, the pound sterling has dropped in value by 10%. This means that imports are dearer, but exports are cheaper and inward
investments are cheaper too. The steel industry for example, which was about to close altogether before Brexit, is now cheaper to run. So its sale has been put on hold and re-investment is no longer considered unrealistic. So far the consequences of Brexit
have been more talked about than have actually happened.