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Making the law
November 2017

European integration has always been messy. Basic to it has been the so-called Franco-German “twin engine” that began with the Elysée Treaty of 1963. Under the terms of the various European treaties, only the European Commission has the power to initiate new legislation in those areas of public policy where the EU has acquired full “competence”. But there has to be a suspicion that, in practice, the Commission pays more attention to informal pressure from German and French politicians than it does to grumbling from humbler member states.

The British, or at any rate the English, have a long and wonderful history as a meaningful nation. Until recent decades they have regarded themselves, almost by definition, as self-governing. To a majority of them the cause of European unity has no appeal and the transfer of power from the nation state to the Commission was anathema. Logically, opinion polls show that the most fundamental issue in last year’s Brexit vote was the recovery of sovereignty.

Some Remainers insist that the EU’s goal is not the creation of a federal super-state; they believe that Britain could rejoin the EU and remain a distinct national unit. The current spat between the Commission and the Republic of Ireland should come as a wake-up call. Since their accession to the then “Common Market” in 1973 the Irish have seen their involvement in European integration as a means of asserting their national identity, particularly as a way of overcoming their past subordination to Britain. Crucial to the process — in which the Irish have been impressively successful — has been the attraction of foreign investors, especially American technology companies, by setting low rates of profits tax.

The trouble is that the Commission — and behind it the governments of Germany and France — have been angered not just by the concentration of tech investment in one small island state, but also by the loss of tax revenue. A year ago the Commission demanded that Apple should pay back taxes to the Irish government of €13 billion, claiming that Ireland and Apple were complicit in “sweetheart deals” that amounted to illegal state aid. The Irish government and tax authorities have made token efforts to comply, but have not yet collected the back tax. In October the Commission decided to take the Irish government to law, specifically to the European Court of Justice, to decide the matters at issue.

No one doubts that Ireland has organised its tax system to induce foreign companies to locate in the country. After all, the setting of tax rates is a basic prerogative of the government of an independent nation state. Similarly, no one doubts that Apple has paid the (negligible) tax that was due, given the wording of tax treaties and legislation in force at the relevant time. Tim Cook, Apple’s chief executive, has described the Commission’s action as “total political crap”.

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