God Morning

Perhaps one of the most underreported stories of recent weeks was the European Union’s ruling on Apple’s tax arrangement with Ireland.  After a three-year investigation, the EU levied what is believed to be the largest and most controversial tax penalty in its thirty year history.  The implications of this are obviously of great importance to Apple and to the Irish government – but it could also have significant implications for the U.S. election cycle.

                First of all, let’s make it clear. Apple got a sweetheart deal from Ireland in return for using the country as a tax haven.  While the Irish government has been traditionally business friendly, the deal with Apple apparently allows it to pay essentially zero taxes, while employing approximately three thousand workers in the country.  It is an even bigger sweetheart deal when one considers that similar low tax jurisdictions – Isle of Man, Bermuda, Panama, etc. – are not members of the E.U. or NATO, both of which provide both military and diplomatic protection, not to mention robust legal protections that smaller tax havens cannot provide.

                An obvious question that needs to be asked is why does the U.S. tax the overseas profits of U.S. corporations in the first place?  And the answer is quite obvious – the U.S. projects global power in a way that paves the way for corporations to do business abroad.  That is to say, that the U.S. military, diplomatic and economic power protects U.S. corporations from expropriation, fraud, intellectual property theft, and contractual disputes involving foreign partners and governments.  In fact, some of the conflicts the U.S. has engaged in the Middle East over the past decade have been characterized by some as ‘resource wars’ – protecting U.S. oil companies and defending the ‘pretro-dollar’ against incursion from China and Russia. This relationship between U.S. corporations and the U.S. government has been traditionally very successful, and the government expects corporations to pay their share of the burden for enforcing contracts and agreements abroad.