Why Ireland doesn’t want €13 bn in taxes from Apple

Normally, one would think that a €13-billion ($14.5 billion) tax bonanza would make a country ecstatic. Any Indian government, for example, would be salivating at the mouth at the thought of nearly Rs96,000 crore landing effortlessly in its coffers. But Ireland is no ordinary country where tax is concerned - and its government insists it doesn't want the colossal windfall from Apple Inc.

The Irish government joined Apple in vowing on 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 come to €19 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 a 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, reports the Associated Press.

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 annually in tax, a figure dwarfed by their much larger investment in salaries (€6 billion), infrastructure and research (€3 billion) and Irish goods and services (€4 billion).

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 Tuesday's award - worth €2,800 ($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.

Irish Times columnist Fintan O'Toole quipped that Ireland's tricolour flag should have an Apple logo in its centre and the country now risked being defined by "the rest of the world as the tax-avoider's crazy little sidekick". He argued that Tuesday's surprisingly "eye-watering figure" of €13 billion meant Ireland might be wise to cash in a chip that would allow Ireland "life-changing" levels of investment in combating poverty.

"Champagne corks should be popping in government buildings with the news that €13 billion is owed to the state, but instead the panic button has been pressed," said Paul Murphy, an opposition Socialist Party lawmaker. "It shows the reality that the government represents the interests of major corporations instead of the majority of people in this state."

He said the Apple money was big enough to clear Ireland's gridlocked waiting list for welfare housing and eliminate a growing trend of homelessness. "Instead," he said, "the government wants to keep Apple on its $200 billion cash pile."

Finance minister Michael Noonan said Ireland couldn't afford to be seen as a country that shafts its key investors. He compared the act to a farmer choosing to eat the seeds rather than grow the crop.

He said overturning the cash award would be essential "to defend the integrity of our tax system, provide tax certainty to business, and ... send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment."