Tempted by an Apple : Europe's Fall from Grace on Retroactive Taxation

OECD and EU have unsuccessfully sought for some decades to rein in what they perceive as “harmful tax competition.” Despite occasional publicity from spectacular (and, in most cases, spectacularly unsuccessful) exemplary enforcement actions, the amount of taxes paid by corporations continues to decline. In the case of allegedly unlawful Irish state aid to Apple, the European Commission engaged with the globally common practice of advance tax rulings issued as a de-facto condition precedent for substantial foreign direct investment. Companies have choices, and forum and treaty-shopping, however undesirable from fiscal or regulatory points of view, cannot be de-legitimized, even if it erodes the tax base of profligate governments whose approach to public finance can be summed up as “tax-AND-borrow.” Following exposure of its near-fatal indebtedness after 2008, the EU discovered “corporations not paying their fair share” as a red herring to assign political blame for Member States' inability to continue financing a comprehensive welfare state. Tax transparency by leaks (LuxLeaks, SwissLeaks, Panama Papers, Bahama Papers among others) can only superficially conceal the fact that democratically elected governments continually live beyond their means and lack creative solutions to increase revenue without slaughtering the geese expected to lay golden eggs. Especially in the case of high-tech industry, initiatives such as the EU Commission's vis-a-vis Ireland and Apple would, in the unlikely event of success, only further contribute to loss of innovative momentum and attractiveness as a corporate domicile in a globalized economy, whatever temporary setbacks free trade may experience