September 5, 2016
The Apple ruling is a moment of choice for IrelandPosted in Sunday Business Post · 122 comments ·
The Apple tax case marks a fork in the road – a moment of choice. It allows us to think strategically, and provides Ireland with an opportunity to think geo-strategically about our next move.
For the past 30 years, Ireland has been trying to straddle corporate America and social Europe. We have become a beachhead for US companies while remaining reasonably good European citizens, genuflecting – at least in public – to European social aspirations, despite the fact that, philosophically at least, corporate America and social Europe are at polar ends of the political spectrum.
As a result, Ireland’s economy has become more profoundly Anglo-American with everything that implies for labour laws, lower taxation, less regulation and free markets. In life, your choice is between risk and insurance. You can take risks or take out insurance against risks, and in the great existential battle between risk and insurance, the Anglo-American bias is for risk over insurance.
So that has been our economic choice. Yet, at every juncture, our civil servant class has signed us up to deeper and deeper EU integration and its subtext of a “social Europe”, with everything that implies for higher taxation, more regulation and managed markets. In the great battle between risk and insurance, the EU bias is for insurance over risk.
Despite these philosophical inconsistencies, the results of our ideological promiscuity for the average citizen of this country have been quite remarkable. Since the early 1990s, when the US multinationals started investing in great numbers and EU structural funds began to diminish as a percentage of GDP, the economy has expanded rapidly. Ireland has been growing on average three times faster than mainland Europe, Irish incomes have risen commensurately and, as a result of US investment, the capital base of the country is much more sophisticated than most other European countries.
The best indicator of this performance is immigration. People head to where opportunity lies. Hundreds of thousands of young people from the EU live and work here because our hybrid, Anglo-American economy has performed so much better than the rest.
These are the macro facts, despite our colossal bust. Geo-strategically, we have avoided making a choice between the EU which, broadly speaking, favours a more socialist worldview; and the US corporate world, which favours a more capitalist outlook.
Balancing both of these in a globalised world is tricky and, sometimes, the inconsistencies come to a head.
Ireland is like a jockey riding two horses. As long as the horses are running in the same direction the jockey’s position is just about manageable but when they run in opposite directions, the jockey’s position becomes uncomfortable and, ultimately, untenable.
This case is the beginning of a war between the EU and the US, not over tax, but over power, which will force Ireland to make a choice. Years ago, as a student in the College of Europe (a sort of finishing school for Eurocrats), and subsequently as a central banker going to EU meetings, I was struck by the deep anti-US sentiment within the corridors of power in Brussels. The goal of the EU in most political quarters appeared to be a European antidote to US global power. This is understandable for crestfallen countries like France – but for Ireland?
Ireland is not, and never has been, a European country in the continental sense of the word. We know this; and so do they. We are an Atlantic race. Our cultural, linguistic, familial, commercial and historical links are with the Atlantic world, with America, Britain and Canada. At a wider level, these deep links are with the English speaking, common-law nations. The notion that we have something deeply in common with the French or Germans (not to mention Romanians or Bulgarians) which comes close to the extent of our link with the Americans is fanciful at best, deluded at worst.
In the past 30 years, our ancestral links to the US have become more concrete by the massive bet that corporate America has taken on Ireland, making the Irish economy look more like Connecticut with poor weather than Tuscany in the North Atlantic. The fact that 30 per cent of our imports still come from Britain underscores the failure of the European project in diverting even our basic trade patterns. The US is our largest trading partner; let’s not forget that, the next time we are lectured by a Danish politician on corporation tax when she doesn’t even pay income tax on her own euro salary.
Our future is not a European Ireland with Atlantic links, but an Atlantic Ireland with European links. This is the way to prosperity. Indeed, the rather Cold War-esque notion of the US and Europe competing for global dominance looks even more outdated when we appreciate that China will soon be the biggest economy in the world and that the EU’s population is only a quarter of India’s. The EU seems increasingly like a legacy project, something like the Commonwealth – an institution or set of institutions whose relevance is becoming more and more tangential. It feels very much a creature of the 20th century.
Since the Eurozone crisis, Brexit and the evident lack of any common position on Ukraine, Syria or indeed the biggest issue, refugees, the EU’s lack of focus has become apparent. These internal inconsistencies imply that the impetus for further integration has clearly stalled, begging the question: what exactly is the EU for in the 21st century?
It may rediscover its mojo, but we can’t wait for that. The world keeps spinning, and is not waiting for the next big bureaucratic wheeze from Brussels.
Looking forward – in a globalised world where Ireland is in competition not only with Belgium and Hungary but with Singapore, India, Israel and Hong Kong for mobile capital, professional employment, hi-tech investment and opportunity – we need to remain attractive to business. This does not just apply to footloose business but to our own entrepreneurial class – both ethnically Irish and, increasingly, ambitious immigrants whose knowledge of foreign markets is a massive silent plus for Atlantic Ireland.
Ireland has to see itself as a hub for global business, and we must regard ourselves as a host for the best and most creative European labour and talent as well as the most cutting-edge US technology. This is the elixir of prosperity in the 21st century. We should aim to be a wired version of a Hanseatic city-state, open, trading, making alliances with everyone, beholden to none. That is what Atlantic Ireland looks like.
Obviously, Apple should pay whatever tax it owes. That tax should go to Ireland. Otherwise, the EU Commission is regarding our Revenue Commissioners as a tax collector arm of other European governments. This is totally bizarre, and raises the question: will those other countries pay the wages of Irish tax officials who are now supposed to be working for them against Apple?
However, the bigger choice is between the Atlantic and the continent. Ireland has always been Atlantic, never continental. With the British now out of the EU, we can play a quasi-continental card, but never forget it is US capital that makes our economy dynamic.
If the bureaucratic EU is on a collision course with corporate America, we should be very clear – from an economic perspective – which side we are on. Atlantic Ireland is our future.