Multi-billion Apple windfall puts Ireland in unusual bind

August 30, 2016

The European Commission's demand for Apple to pay Ireland some 13 billion euros in back taxes has put the country in the strange position of refusing the windfall for fear of scaring away valuable investment.

Rather than welcoming the cash—equivalent to around five percent of its gross domestic product—the government has vowed to appeal the ruling, fearing an ever greatest cost to its economy and jobs.

Finance Minister Michael Noonan said he disagreed "profoundly" with Brussels while Apple chief Tim Cook warned the ruling threatened jobs and investment in Europe.

Cook said Apple, the world's most valuable company, was now in the "unusual position" of being asked to pay taxes to a government that says they are not due.

But opposition politicians urged Ireland, which has suffered years of austerity following a painful recession during the eurozone, to take the Silicon Valley giant's cash.

"EUR13bn Apple Tax could build 86,000 council houses. Shelter for Apple but none for the homeless," tweeted left-wing opposition politician Richard Boyd Barrett.

More than seven out of 10 people in a national radio poll also thought that Dublin should take the money, piling pressure on the government.

'Greater tax fairness'

But Ireland has to weigh up the cash windfall against the potentially more long-term damage the ruling could do to its image as a low-tax place to do business.

Multinationals with major operations in Ireland now employ more than 170,000 people—one in ten workers—and the rate of 12.5 percent is one of the lowest in Europe.

This corporate tax regime has been one of the cornerstones of its strategy for attracting inward investment and it has been spectacularly successful in doing so in recent years.

With 5,000 workers and another 1,000 promised, Apple is the single biggest employer in Cork, Ireland's second-biggest city, and one of several US tech giants with their European hubs in Ireland.

Although the case pertains solely to Apple, the tax practices of other Dublin-headquartered multinationals such as Google and Facebook have been heavily criticised internationally in recent years.

On revenues of 12.4 billion euros in 2011, Google paid just 22 million euros in taxes in Ireland.

Irish MEP Brian Hayes said he feared the ruling could damage Ireland's future ability to attract investment, although it will likely be welcomed in many European capitals, particularly in Paris.

The Irish has been widely criticised by Ireland's EU partners, while France is a leading critic of a race-to-the-bottom among EU member states to cut tax and social conditions to attract foreign investment.

"I have no doubt this will cause significant reputational damage to the country and that is why the government must appeal this decision," Irish MEP Hayes told national broadcaster RTE.

Investment house AJ Bell said in a note that the decision "could deter fresh investment by leading corporations, to the potential detriment of employment and income tax contributions".

'Rich with talent'

Apple was quick to point out that it invested in Ireland when the country was struggling economically.

Cook noted that the company had opened its first facility in Cork in southwest Ireland in 1980 at a time when the area was beset by "high unemployment and extremely low economic investments".

"Apple's leaders saw a community rich with talent and one they believed could accommodate growth if the company was fortunate enough to succeed," he said.

"As our business has grown over the years, we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world," he wrote.

Meanwhile, one trader said that Britain, which voted to leave the EU in June, could end up being the beneficiary.

"If Ireland cannot offer sweetheart deals within the EU, the City of London can perhaps offer something more appealing outside the bloc," said Neil Wilson from currency trader ETX Capital.

Explore further: Apple says will appeal EU tax ruling

Related Stories

Apple says will appeal EU tax ruling

August 30, 2016

Apple vowed Tuesday to appeal an EU ruling ordering it to pay a record 13 billion euros in back taxes in Ireland, saying the decision would harm jobs and investment in Europe.

EU orders Apple to pay up to 13B euros in back taxes

August 30, 2016

Apple has to pay up to 13 billion euros ($14.5 billion)—plus billions more in interest—in back taxes to Ireland after the European Union found Tuesday that the U.S. technology giant contributed almost no tax across the ...

Apple to fight record EU tax bill (Update 4)

August 30, 2016

Silicon Valley tech titan Apple will fight an EU demand for a record 13 billion euros in back taxes in Ireland, a move Washington warned could damage transatlantic economic ties.

Recommended for you

Augmented reality takes 3-D printing to next level

February 20, 2018

Cornell researchers are taking 3-D printing and 3-D modeling to a new level by using augmented reality (AR) to allow designers to design in physical space while a robotic arm rapidly prints the work.

What do you get when you cross an airplane with a submarine?

February 15, 2018

Researchers from North Carolina State University have developed the first unmanned, fixed-wing aircraft that is capable of traveling both through the air and under the water – transitioning repeatedly between sky and sea. ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.