This October there has been a hopeful turnaround in the battered European tax system. The change began on September 10, with the historic ruling of the Court of Justice of the European Union (CJEU) (C-465/20 P), which ruled in favor of the European Commission and sentenced the American multinational Apple to pay 14.3 billion euros for unpaid taxes in Ireland. Thanks to its peculiar low tax regime, Ireland operates as a tax haven by making it easier for American multinationals to divert part of their profits to their country, which in 2020 exceeded 140 billion euros.
What has been truly surprising has been the reaction to the sentence from the Irish authorities. Finance Minister Jack Chambers has hailed this tax windfall as “transformative” and has announced to dedicate the money to “housing, energy, water and transportation.” Ireland, with a population of 5.4 million inhabitants, has a dramatic housing deficit, like other European States. Official entities estimate the construction needs for the next quarter of a century at 52,000 homes per year.
After having resisted for years to correct its tax system, the forced rectification of the Dublin Executive reveals that the shortages of housing and other social infrastructure are not due to lack of money, but to an inefficient and unfair tax system.
The case once again puts the focus on tax havens and the losses they cause in the collection of corporate tax from multinationals, which rise from 20% in Europe and 14% in the United States, according to the EU Tax Observatory. This hole adds to the reduction of the average rate of corporate profit taxwhich has decreased from 50% in 1985 to 21% in 2020.
The European Union and Spain have a lot to correct in this area. An Oxfam study indicates that between 2015 and 2020 the profits of large Spanish companies diverted towards tax havens have amounted to around 114.5 billion euros. He specifies that “the preferred destination for Spanish companies to divert their profits is European tax havens. Of the almost 18 billion euros of diverted profits in 2020, 84% went to Europe.” Íñigo Macías, researcher at Oxfam Intermón, estimates that “the losses in tax revenue in Spain due to corporate tax during this period amount to 29.1 billion euros.” Considers that “the corporate tax is not equitable because “benefits large multinationals,” but admits that “the establishment of a minimum rate of 15% and the obligations to exchange information between countries are a step forward.”
Ireland’s fiscal rectification and attention to social needs are lessons that should be taken into account in the tax reform that the Government is preparing. The financial needs for social spending are not impossible if adequate taxation is available. It is a decision on which millions of people and the good performance of the economy depend.
