European Commission Hits Back at Former Official in Apple Tax Spat

TechCrunch Disrupt London 2014 - Day 1
LONDON, ENGLAND - OCTOBER 20: Neelie Kroes, Vice President of the European Commission on stage during the 2014 TechCrunch Disrupt Europe/London at The Old Billingsgate on October 20, 2014 in London, England. (Photo by Anthony Harvey/Getty Images for TechCrunch)
Anthony Harvey Getty Images for TechCrunch

It’s not common for a war of words to break out between the European Commission and one of its former commissioners, but the $14.5 billion Apple tax ruling is no common matter.

Neelie Kroes, the former commissioner for both the Commission’s competition and digital policy departments, on Thursday penned a Guardian op-ed in which she criticized the decision to go after Apple’s tax arrangements on state aid grounds.

Current competition commissioner Margrethe Vestager this week said Ireland had broken state aid rules by accepting Apple’s tax scheme and effectively letting the company—a major employer in Ireland—get away with paying as little as 0.005% in corporation tax.

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In her Guardian piece, Kroes said state aid rules were “not suited” to dealing with the mismatches between national tax laws (Apple says it keeps its billions outside the U.S. due to the American tax code).

She suggested that Vestager’s decision represented a “radical new approach to so-called transfer-pricing rules that determine where profits shall be allocated,” thus undermining the ability for EU member states to write their own tax laws.

Vestager has already said that transfer pricing, where subsidiaries pay one another for intellectual property, was not a factor in the Apple-Ireland case, although her department has still not published the full nonconfidential version of her decision.

“You cannot change the rules of the game through ad hoc state aid enforcement, and then seek retroactive recovery for unpaid taxes,” Kroes wrote.

On Friday the Commission’s chief spokesperson, Margaritis Schinas, responded to a question about Kroes’s piece in the Commission’s midday briefing.

It was a polite reply in phrasing but not content, as Schinas drew attention to the fact that Kroes is these days a public policy board member of another big U.S. tech firm, Uber, which also uses elaborate tax planning schemes. She is essentially a lobbyist now.

“We understand that it may be sometimes challenging to reconcile the role as a former commissioner with the temptation to publicly express the views of those in Silicon Valley or elsewhere who oppose the Commission’s decisions,” Schinas said.

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He went on to say that Kroes had incorrectly described how Vestager’s department had applied EU state aid rules in the Apple-Ireland case. Of course, that decision still isn’t out there for everyone to read and analyze. And why’s that?

“We hope Apple and Ireland will be as cooperative as possible in order for us to be able to publish the decision as fast as possible so that everyone can read for themselves,” Schinas concluded.

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