‘Ireland must fight the Apple tax case, and it must fight to win’

6 Sep 2016

In light of the Apple tax ruling, Abigail Slater, general counsel with the Internet Association in the US, explains why she believes Ireland must fight the ruling.

 As we head into a protracted legal battle over Apple’s EU taxes, it’s important to reflect on what the case says about Ireland’s role in an increasingly connected, digital world, as well as the country’s relationship with the EU.

Both Ireland and the EU institutions are at an inflection point when it comes to digital policy: one path embraces the internet and seeks to ensure that EU start-ups and scale-ups win the next innovation cycle; the other path seems to fear the internet and the inevitable change it brings to EU economies.

Future Human

The first path embraces a flat world and the second seeks to build borders around a borderless and decentralised network of networks.

Let’s travel down the first path for a moment and look at the bigger picture at play here. The EU Commission’s Apple tax decision should not be viewed in isolation. On the contrary, there is growing evidence that the EU plans to use the (sometimes blunt) tools available to it to curb the internet within the EU. Unfortunately, Ireland with its stubborn Atlanticism and global outlook seems to be the scapegoat for several of these policies.

Three seemingly disparate episodes are evidence of this trend. The first arose last year when the European Court of Justice in Luxembourg struck down the international agreement that allowed for data transfers between the EU and the US known as Safe Harbour.

Safe Harbour

The Safe Harbour case began life in the Dublin High Court on appeal from the then Irish Data Protection Commissioner. The overarching reason the court gave for its decision was its concerns about US surveillance law and practice. Interestingly, the court did not examine surveillance policies of EU member states, many of them grounded in the same national security concerns as the US. As US vice-president Joe Biden likes to say: “Don’t compare me to the almighty; compare me to the alternative.” Unfortunately, the court in Luxembourg did not heed this advice, creating massive legal uncertainty and tension between the EU and the US that has thankfully abated in recent months.

‘That the tech industry has thrived and survived in Ireland for several decades must not be seen as a passing fad or something to be ashamed of’

The second development straining EU-US digital relations involves the relentless focus from some quarters in the EU Commission on US tech companies, whether through competition enforcement against Microsoft, Intel, and Google, or, more recently, through a draft copyright policy that would effectively create a tax on Google News search results – a policy that already flat-lined when enacted into Spanish and German law.

The copyright package is the latest plank in the Commission’s Digital Single Market (DSM) strategy, the political goal of which is to create a more seamless internal market for digital goods and services and to foster investment and growth in EU start-ups. Although the DSM is a worthy cause, it has unfortunately become a vehicle for policies set on curbing US internet companies’ growth in the EU. Even more unfortunate is that, in so doing, the Commission will also limit the growth and even existence of EU start-ups in the process, many of which have chosen to move away from the EU to Silicon Valley in order to be successful.

Apple tax ruling the latest test

And now we have the Apple tax case, which even EU legal scholars agree is a novel application of the system’s state aid rules. It’s also retroactive in a way without precedent in EU case law. Differently stated, it appears that the Commission ignored existing law and even its own previous decisions in making the Apple tax ruling.

Additionally, in order to preserve the rule of law, a robust EU state aid ruling requires evidence that competition between the EU member states was distorted by the actions of the company involved, in this case Apple.

Unfortunately, even a primary school child could tell the Commission that EU-born competition in the markets in which Apple competes is sadly lacking. If this competitive landscape is to change, the EU must first concede the role it plays in over-regulating its own start-ups and scale-ups to the point where they cannot compete with their overseas counterparts. Until then, there will be little competition to “distort” (to use the EU terminology).

Which brings us back to Ireland, the fork in the road, and the road less travelled.

As an Irish-American internet advocate, I firmly believe that the path forward for the EU has to be the path that embraces a global, connected, and digital future. The fact that Ireland travelled this path first before other EU member states should come as no surprise: the Irish diaspora embraced globalisation before it was even a “thing”, and the US has always embraced Ireland. That the tech industry has thrived and survived in Ireland for several decades must not be seen as a passing fad or something to be ashamed of, on the contrary, Ireland, with the help and goodwill of its American diaspora, has successfully embraced the tech industry’s innovative spirit and this must be seen only as a source of pride (not to mention a competitive advantage on a global level).

Which is why Ireland must fight the Apple tax case, and it must fight to win.

Abigail Slater

Abigail Slater is a dual Irish and American citizen and general counsel at the Internet Association in Washington, DC. She holds a master’s degree in EU law from Oxford University. The Internet Association represents 40 of the world’s leading internet companies (Apple is not a member). The views expressed are her own and not those of Internet Association member companies.

Spilled apples image via Shutterstock