Apple: The EU must be bonkers

I am stunned at the European Commission’s attack on Apple. Even if they have won the latest round they they must be the losers in the end.

Even if Apple Stores Inc has to pay a $14,6 billion they will just price it into their products, plus a bit more for pain and suffering. So it will have little effect on the Apple share price. The same thing happened with the settlement of the tobacco cases in the USA a few years ago.

The European Commission is interfering with a sovereign state’s tax policies. They are following a dream that all member sovereign states will sit on the same page of tax policy. And that will just never happen.

The real dynamic in the matter is Brexit. Once the UK have left the EU British Foreign Secretary Boris Johnson and Chancellor Phillip Hammond will be at liberty to design tax policy to attract foreign investment at the expense of the EU.  They just have to quote those famous lines of Lord President Clyde in Ayrshire Pullman Motor Services and DM Ritchie v IRC.

‘It is trite law that His Majesty’s subjects are free, if they can, to make their own arrangements so that their cases may fall outside the scope of the taxing acts. They incur no legal penalties, and strictly speaking, no moral censure, if, having considered the lines drawn by the legislature for the imposing of taxes, they make it their business to walk outside them.’

 Even Mr Austerity himself, former Chancellor Osborne, could see this when he targeted further reductions in the UK tax rate to attract foreign investment.

Osborne, despite the adverse publicity, allowed the UK tax authorities settled for a mere 130 million pounds in the Google tax dispute. A mere rap on the knuckles. Why? Because the UK honored the tax law that existed at the time and left issues of equity and fairness out of the debate.

Meanwhile the French tax authorities are raiding the Google Paris offices in a manner not seen since the German occupation. They are obviously expecting a whole lot more by arguing, in substance, Google owes a whole lot more. That’s the stuff the public like to see.

But despite what the public may think, allowing ‘the substance’ to enter the debate creates uncertainty foreign investors just don’t like. Try Lord Tomlin’s word in Inland Revenue Commissioners v Westminster (Duke).

The sooner this misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting “the uncertain and crooked cord of discretion for the golden and straight meter wand of the law”

So post Brexit the UK will become a very favourable tax destination with a reputation of sticking to the law. This will employ gaggles of Poms who will pay fortunes in personal tax. London will become the ultimate international headquarter company destination.

It won’t be long before the rest of the EU starts thing ‘maybe this is not such a good idea.’

A fundamental of international tax planning are that investors (particularly the USA) prefer to pay tax at home. The less tax paid internationally, the more that gets paid to Uncle Sam or his equivalent.

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