The EU is foolish to go after Apple for $14.5 billion in back taxes

Tim Cook
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Tim Cook

There are few things as constant as the arrogance and insularity of a bureaucrat with a little power. And this week, thanks to the power-hungry and foolish European Union, we're seeing that kind of non-self-aware arrogance going at full blast as the European Commission is demanding that Ireland collect a whopping $14.5 billion in back taxes from Apple. The commission insists Ireland had no sovereign right to charge Apple lower tax rates and now it wants Apple to pay up. Have a nice day.

Usually, international tax and trade disputes are about as boring as they sound. They rarely tap into any kind of popular or profound debate of the day. But not this time. Barely two months after much of the world's so-called economic and political experts whipped themselves into a hysterical collective moaning about Britain's vote to leave the European Union and smeared it as some kind of collective national racist lynch mob, that same EU has now provided the world with just about the clearest example of exactly why the U.K.'s voters made a very, very smart choice. Basically, the people of Britain voted to leave the EU because the EU and national freedom don't mix. And now the government and people of Ireland are learning that the hard way.

Thankfully, this puts us into a far more interesting and enduring debate. And that debate is not this ephemeral conflict over corporate tax rates between Ireland and the EU or even between the U.S. and the EU. Instead, this is really just the latest battle between those who really believe in economic and political freedom, and those who don't. It's really as simple as that. What makes this Irish Apple dispute so good is that it's serving as a kind of expert detector of which side a person or the politicians really are in the freedom vs. no freedom debate. For example, if your hear someone say: "I'm all for economic freedom but …" that's a pretty good sign that person is not really for economic freedom after all.

Usually, the points that come after "but" in that declaration include lots of uses of the words "fairness," "equality," and "corporate crooks." That's the thing about freedom: It's only really in effect if people have the opportunity to take advantage of it and leave competitors in the dust. You can't have real freedom without real competition, and you can't have real competition without real freedom.

Taxes are just the subtext of the moment. You might notice that the people who usually push for less competition and freedom of both are usually politicians and bureaucrats who already have real power and have the most to lose if they suddenly had to compete freely for it. No wonder EU President Jean Claude Juncker recently called borders the "worst thing ever invented;" he must hate borders for getting in the way of the EU's never-ending desire for unfiltered power.

"Basically, the people of Britain voted to leave the EU because the EU and national freedom don’t mix. And now the government and people of Ireland are learning that the hard way."

Of course, freedom shouldn't be confused with anarchy. And that means when a society legitimately agrees on certain laws and rules, that society can and should punish offenders. But the problem with big centralized and unelected powers like the EU is that the people in many of the countries have not legitimately agreed to that level of governance. And, all too often, when those people have complained about that, they've been ignored, dismissed, or slammed with even more autocratic dictates than they suffered with before. And so, the people of Britain voted to leave that kind of abusive arrangement and now the people of Ireland may do the same — if they're smart.

If any of this EU chicanery and power-hungry madness has my fellow American readers feeling somehow smug and superior to our European counterparts, take a look in the mirror. Because when it comes to hypocrisy in international trade and politics, the U.S. government is definitely a contender for the world title. The U.S. continues to maintain just about the highest corporate tax rate in the world. And the real reason Treasury Secretary Jack Lew opposed this EU move to grab more taxes from Apple is because the U.S. considers those potential taxes to be ours!

But that's not all. Despite massive increases in federal tax revenues to record highs, Lew has made an annoying habit of wailing about corporate tax inversions that cost the Treasury a pittance compared to those record trillions the Treasury has been taking in lately.

Presidents and even presidential candidates from both parties routinely complain about foreign-currency manipulation when no one country has manipulated its currency more than the U.S. from the moment we took the dollar off the gold standard 45 years ago to every Fed interest-rate move and comment up to today.

There's simply not a lot of room for freedom when the world's governments are too busy fighting over how much money they can take from those who create the wealth in the first place. There was once a time when sales taxes and customs duties were enough to fund the engines of state from Europe to the New World. But now we've somehow come to a place where corporate taxes are not only an accepted policy, but we actually hear from politicians and economists who argue no country should have the sovereign right to charge its own corporate tax rate … because that wouldn't be "fair" to the other countries who want to charge more. The strong argument many have made to abolish corporate tax rates altogether to boost economic growth all over the world isn't even making it into this current Apple/Ireland/EU kerfuffle, and we're all the poorer for it.

The EU and "progressive" groups that call for uniform tax rates are actually right when they say economic freedom does not produce "fair" results. That's what makes freedom what it is. But the alternative, as Ireland and Apple know all too well now, is allowing someone you don't know and certainly didn't elect to decide what's fair for you and everyone else. That's not fair either. That's something else we call "tyranny."

Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.

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