Ireland’s €13bn Apple windfall leaves cash-rich country with spending dilemma

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Ireland’s government has shrugged off calls to say how it would spend €13bn in back taxes from Apple, a fiscal windfall to which it devoted millions of euros in legal fees to avoid receiving.

In the conclusion to a decade-long regulatory battle, the European Court of Justice ruled against Ireland on Tuesday, confirming that it had handed Apple an illegal sweetheart deal giving the US tech group an ultra-low tax rate.

Ireland now has to accept the cash, despite spending $10mn on legal fees to claim that it had given Apple, one of its biggest taxpayers, no special treatment.

The government is under pressure to use the windfall to tackle acute housing, energy, water and infrastructure crunches.

Pearse Doherty, finance spokesman for opposition party Sinn Féin, said the ruling had left the government with “egg on its face”.

“This verdict ends one of the most extraordinary episodes of Irish politics,” he said in a statement. “Over the last eight years, we have seen [the parties] Fianna Fáil and Fine Gael [in coalition government] go to extreme lengths to stop the state collecting taxes that were lawfully owed.”

Jack Chambers, finance minister, played down the prospect of reputational damage to a country that has become one of the most prosperous in the EU as a result of foreign investment spurred in part by a low corporate tax rate.

Chambers told a news conference the Apple case was a “legacy matter” relating to rules in place decades ago which had “evolved, modernised and reformed”.

The exact amount Ireland will receive was yet to be determined, he said.

Almost €14bn from Apple has been sitting in escrow pending the final ruling. It is made up of the €13bn owed, plus interest, although some losses have been realised on bond investments.

Apple could also face claims from other countries that part of the amount belongs to them, Chambers noted. He declined to give details.

Many governments might relish the prospect of such an extraordinary boost, but Ireland is already awash with cash. It is preparing a giveaway budget on October 1 that the Irish Fiscal Advisory Council, the country’s independent watchdog, has warned risks overheating the economy.

The government expects an €8.6bn surplus in 2024 on the back of booming corporation tax revenues, largely paid by global tech and pharma companies with their European headquarters or big operations in Ireland.

Ged Nash, finance spokesman for the Labour party, told RTÉ radio that the Apple tax haul had “no shortage of good homes to be found”.

The ruling comes months before an election in which polls suggest Fine Gael and Fianna Fáil are set to retain power.

Paschal Donohoe, public expenditure minister, criticised opposition calls “to spend every single cent”.

“We’re better off leaving some money . . . to tomorrow,” Donohoe said. “You never know what’s around the corner.”

Ireland has already set up two sovereign wealth funds to save more than €100bn for future pension, climate and infrastructure challenges.

Legal experts said the ruling could open the door to further scrutiny of Apple and other historic tax arrangements made by member states.

Apple’s effective global tax burden has fallen sharply in recent years. Company fillings show it paid an effective rate of 15.9 per cent for the quarter to the end of June this year, compared with 25.5 per cent in the same period in 2016.

The European Commission can recover funds under state aid rules subject to a limitation period of 10 years.

Chambers, who said he had not been in touch with either Apple or US authorities since the ruling, said he did not know of any other such case in Ireland or any that the European Commission was investigating “presently”.

Adam Craggs, partner at law firm RPC, said: “The judgment will certainly further fuel the debate that Ireland provides a tax haven to multinationals.”

Farhan Azeem, head of transfer pricing at PKF Littlejohn, said: “Multinationals that have profited from setting up a European hub in Ireland can expect to face further scrutiny.”