The EU Commission is taking a tough stance on tax evasion, as shown with the 13 billion euro bill leveled at Apple.
BRUSSELS — Jean-Claude Juncker had only spent four days as president of the European Commission in November 2014 when an enormous scandal erupted. "Luxleaks," revealed in several top European newspapers, detailed how Luxembourg had favored large-scale tax optimization while Juncker had been prime minister of the Grand Duchy for 18 years.
It is a supreme irony that two years later, the Juncker-led Commission is poised to become a leader in the fight against tax evasion, with this week's case against Apple as a centerpiece case. The Luxembourgian politician may well be rubbing his hands in glee.
The backlash against Apple for its alleged illegal tax arrangements with the Irish government — the EU says it owes the country 13 billion euros in back taxes — was not unprecedented. Before the American tech giant, U.S. coffee retailer Starbucks and Italian automaker Fiat paid unusually low taxes in exchange for basing their operations in the EU. Amazon and McDonald's could be the next big ones on the list. Those earlier cases had been initiated by former EU Commissioner Jose Manuel Barroso and were expedited under Juncker.
Two years ago, when the European Union executive branch realized how difficult it was to fight tax optimization using existing legislation, it chose to tackle the issue with a unique tool: The so-called "state aid rules" that bar governments from giving special status to companies.
In the last few months, the various scandals surrounding tax havens have led to further legislative changes: New laws on transparency have been incorporated into fiscal policy, as has the OECD's recommendations on combating tax evasion, which are now well advanced. Even though it had to scale back its initial ambitions, the Commission managed to maintain a tough stance and has achieved unprecedented progress after being largely hamstrung under the previous tax regime.
Although so much has changed in a short period of time, the Commission is likely to face increasing opposition from other individual EU countries in the wake of the Apple case. By ruling against Ireland's tax arrangement with Apple, it has intervened in national tax policy, something EU states are likely to sorely resent.