What do Apple's tax and Brexit have in common?

21 December 2016

George Bull

In the case of Apple’s tax, in one of the most contentious tax decisions which I can remember the European Commission has demanded that Ireland should claw back €13 billion of state aid from Apple, on the basis that Ireland entered into a special tax deal with Apple. Both Ireland and Apple are appealing against that decision, contending among other things that there was no special deal, that Brussels is interfering with national sovereignty, and that the European Commission does not understand how tax systems operate.

When it comes to Brexit, the uncertainties are of a completely different nature. Does the Prime Minister have sufficient authority to give notice under Article 50? What is the mechanism for negotiating the terms of exit within two years of triggering Article 50? Once notice has been given under Article 50, can it be withdrawn? Is it possible for somewhat different outcomes to apply to different parts of the (currently) United Kingdom?

So many questions, so few answers. And that's where the similarities emerge. Whether one considers the state aid proceedings in respect of Apple’s tax, or the mechanism for the departure of a member nation from the EU, the common feature is this: both scenarios are reliant on the satisfactory performance of the machinery of the EU. Since the UK joined the European Community in 1973, this machinery has been used to a somewhat greater extent (in the case of state aid) or a lesser extent (actually, not at all) in the case of Article 50. But the machinery has never been tested with the loads it has to bear now. Rather like tower cranes constructing huge buildings, or airbags in a car, we generally take their performance for granted. But, if we ever think about it, we sincerely hope that the crane never drops its load under pressure, and that the airbag works properly first time, every time.

Over the next year or two, mechanisms which have remained largely untouched for almost half a century are going to have to bear loads which were perhaps never contemplated by their designers. It's in everybody's interests that the machinery doesn't fail.

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