Apple Is Just the First Salvo in the EU’s Fight to Tame the Tech Giants

September 1, 2016, 12:30 PM UTC
TO GO WITH AN AFP STORY BY CONOR BARRINS A woman walks past Apple's new offices on Half Moon Street in Cork city centre, southern Ireland on October 2, 2014. Perched on top of a hill overlooking the Irish city of Cork, surrounded by a dated industrial estate, Apple's European headquarters is an unlikely base for the world tech giant -- now under growing scrutiny over its local tax arrangements. The company has been in Cork since 1980 but the European Commission's suggestion that its tax deal with Ireland may amount to illegal state aid has drawn new attention on the Irish link for the makers of the iPhone and the iPad. AFP PHOTO / PAUL FAITH (Photo credit should read PAUL FAITH/AFP/Getty Images)
Paul Faith — AFP/Getty Images

As is often the case when Apple is involved, the sheer size of the European Union’s recent tax decision against the company almost defies the imagination. The EU said this week that Apple has to pay back $14.5 billion worth of tax it avoided as a result of deals it struck with Ireland.

Of course, even such a gargantuan tax bill wouldn’t be a big stretch if Apple (AAPL) decided to pay. It makes about $4.5 billion in profit every month, so it could pay the EU penalty in a little over three months.

But that’s not the point. The point is that the decision, which ruled that Ireland gave Apple favorable tax deals in contravention of European Community regulations, is just the beginning of the EU’s war on global tech giants like Apple, Google (GOOG), Amazon (AMZN), and Facebook (FB). In Apple CEO Tim Cook’s view, it’s “total political crap.”

Poorer countries like Ireland routinely play tax games in order to attract investment from these massive corporations, because they believe the jobs and spin-off effects are worth it.

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What the EU is saying is that this is no longer going to fly, and that the interests of the European Community take precedence over any individual country’s needs. And Competition Commissioner Margrethe Vestager has made it clear Google is next on her list of targets.

The EU no doubt sees itself as standing up to big-footed U.S. tech behemoths, but there’s a risk that this strategy could backfire badly, and cause the big four to invest their billions elsewhere. If this is a game of global chicken, it’s not at all clear that the EU is going to win.

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