In normal circumstances, a 13 billion euro (USD 14.5 billion) cash award would make any country ecstatic. But Ireland is no ordinary country when it comes to tax law and its government insists it doesn’t want the colossal windfall.
The Irish government joined Apple in vowing Tuesday to appeal the European Commission’s judgment that the smartphone and computing giant didn’t pay the correct volume of tax to Ireland for more than a decade, a mounting bill that analysts say could constitute 19 billion euros (USD 21 billion) with interest. At stake is the foundation of Ireland’s multinational-dependent, export-driven economy, which has rapidly rebounded from a banking crisis and 2010 international bailout to become once again the fastest growing in Europe.
Since the 1980s, successive Irish governments have made low corporate tax and other tax-avoidance measures a key part of their sales pitch to woo foreign firms to Ireland. Today, most of the biggest names in drug making, social media and online commerce, software and other high-tech industries have made Ireland their preferred European base in part because, as the European Commission’s damning judgment has just concluded, the Irish seek to tax multinationals’ worldwide profits as little as possible.
Instead, Ireland’s strategy aims to keep as many foreign job creators anchored on the island as they can. The approximately 1,000 foreign companies, mostly American, on Irish soil employ 100,000 people some 5 per cent of the workforce but generate more than nearly a quarter of Ireland’s economic output. They directly pay Ireland more than 2 billion euros annually in tax, a figure dwarfed by their much larger investment in salaries (6 billion euros), infrastructure and research (3 billion euros) and Irish goods and services (4 billion euros).
If Apple were to lose its appeal, Ireland’s sometimes gravity-defying growth would lose a key foundation stone as a succession of companies with similar tax deals face retroactive charges rendering the tax-efficient reputation of Ireland null and void. But the sheer size of today’s award worth 2,800 euros (USD 3,150) for every man, woman and child in Ireland creates unexpected political difficulties for the government, which briefed journalists beforehand to expect a vastly smaller sum.
The money could transform Ireland; the Irish Times bills it as the equivalent of 20 new hospitals or an end to property tax for the next quarter-century.