The European Commission (EC) shocked the world with the enormity of the tax penalty they just filed against Apple. With the situation being so visible and bearing repercussions for so many workers and countries, it’s difficult to look at the situation without pondering what it could mean. In order to find those answers, here are some details you should know about the major players involved.
AppleTim Cook has made a few things abundantly clear. First, Apple will appeal the decision to the extent of their power. Second, the company has no intention of abandoning its holdings in Ireland. In fact, they intend to increase their investment in the region despite the recent ruling.
Most of this decision is based on the knowledge that the appeals process will not be fast. Most legal experts estimate a minimum of three years before any final verdict could force Apple’s hand.
Apple also seems fairly confident that they will win the appeal. The company has been a major player in boosting Ireland’s economy, and across all of Europe, Apple directly supports or employs 1.5 million people. The EU can’t really afford the fallout that could come from sustaining the current ruling, much less pushing this aggressive agenda further with other multinational companies.
Europe
That brings us to the next major point. The European Union is facing the greatest threat and stress this year that it has ever seen. Brexit is only one highly visible consequence of a situation that has been spiraling out of control for the past decade.
This recent crackdown on taxation is in no small part a response to losing one of the key economic and political powers of the union. The actions are at minimum short sighted, as most of the world is responding very negatively. Already countries like Australia and Singapore have made it clear that they will work with major corporations that can no longer find a home in Europe.
The actions are severe enough that buzz of an Ireland exit is already gaining steam, and losing major investors like Apple could hasten the looming end of the union altogether. In spite of that, the EC is forging ahead with investigations of Amazon and McDonalds, with other corporations sure to follow.
There is still a strong chance that the EC might recoil with so much global political backlash, but if they don’t, companies and the subsequent jobs will likely see a mass exodus from the EU.
Ireland
You already read mention that Ireland has begun discussing their own exit from the EU. Such a decision will not come quickly, but it may already be inevitable. Ireland has suffered massive economic troubles at the hand of EU rulings. The country struggled to provide their share of the 2010 bailout, and with more bailouts looming, their only recourse could be to leave.
The Apple situation itself is reason enough to go, but no such decision will be entertained before the appeals are settled. Apple and similar multinational companies currently employs 75,000 Irish citizens, with more hiring planned.
If this sounds like a big number, wait until you consider the size of Ireland. The country has a population of only 4.5 million, which means international corporations directly employs 34 percent of the nation’s entire labor force. You can imagine that a number of other jobs only exist because of this income.
The country absolutely cannot afford to see any of these countries go, and Apple is not the only one being investigated. You can safely assume that Ireland will choose its own self-interest over that of the EU if they are pushed to that point.
The United States
After throwing around so much information, it’s time to focus on the bottom line. What does this mean for the U.S.? In the short term, nothing will change. No one needs to relocate or take drastic action for the next few years, safely waiting through the appeals process.
On a larger scale, if the EC continues their planned investigations and hits other huge companies like they did Apple, it’s likely that future business operations will hesitate to expand into the EU. That opens many other markets, and inevitably at least some of those jobs will land in the U.S. Singapore and Australia stand to benefit a larger influx of work, but it could still boost domestic production here.
Politically, the situation is very tenuous for the EU. The United States has made it clear that they do not recognize the EU’s tax claims, and that American companies earn American money that is to be taxed by the American government.
This is a situation that stands to push many trade talks in the direction of the U.K., further impeding the EU’s ability to withstand the failing economies of several member nations. Whatever happens, you can trust that American companies will suffer minimum damage, with a chance of a small increase in domestic job opportunities.
Regards,
Ethan Warrick
Editor
Wealth Authority
