Just like Brexit, the negative response to Apple ruling may be overdone

In the Irish media we are prone, like our international brethren, to making grand, snap judgments.

The desire to get on the right side of history as quickly as possible is a difficult one to suppress — particularly given the constant, rolling nature of journalistic deadlines. 

This inclination is also found among the political and economic classes.

When analysing breaking developments, a mantra worth remembering is one popularised by the legendary US hip-hop act Public Enemy: Don’t Believe the Hype.

It is tempting to think that certain events signify a turning point in history; that an unexpected or unwelcome shift can point the way to something more fundamental. 

The recent concerns about Brexit and the Apple tax ruling are instructive here.

Just take a look at the Brexit data. After almost instant consensus that the Brits were headed for an unavoidable recession — the consensus makers are now not so sure. 

Just witness Mark Carney’s appearance before a Commons committee last week. The Bank of England governor stood by his emergency action following the Brexit vote. But there was some discomfort nonetheless that the more fevered predictions of short-term turmoil had failed to play out. 

Manufacturing data in Britain has surprised on the upside.

The British services sector saw a record bounce in August — this followed unexpected improvements in consumer confidence and high-street spending. 

Currency traders are, meanwhile, recalibrating their expectations for sterling.

Just a few short weeks ago, the pound was plunging towards 90p against the euro — a psychological landmark that filled Irish exporters and the Irish tourism industry with dread. 

It may well follow that such a moment is not too far off — but the brief respite has bought a little breathing room. 

In the same way that many investors and analysts failed to see Brexit coming, this period of relative growth was also unsighted.

Likewise, the panic over the Apple ruling may soon be seen as over-done. The rhetoric was ramped up in the Dáil last Wednesday. 

The Taoiseach described the Commission finding as hugely damaging to Ireland. The Minister for Finance said it could be a landmark that changes everything. 

Putting aside the fact that hardly anyone in Government circles seemed to see the sheer size of the tax bill that was coming, will we soon view what has happened through less apocalyptic lenses? 

There is no doubt that there are political moves afoot to undermine Ireland’s tax regime - and it would be irresponsible not to tackle those forces head-on. Reputational damage has surely been done. 

But is the case over-stated?

Check out the analysis provided by Fitch Ratings. 

Yes, I know, what would those ratings lads have a clue about — didn’t they miss 2008? However, their relative distance from the heat and noise generated in media and political circles might just give them a little bit of perspective.

Fitch concludes that while the Commission ruling has the potential to create medium-term economic uncertainty, the risks posed to Ireland in terms of jobs and investment is ‘limited’. 

The analysts there claim that the 12.5% corporate tax rate and Ireland’s ‘high human development and governance indicators’ should keep it attractive to multinationals. 

It points out that the cost of relocating the 200,000 jobs directly dependent on foreign investment would be ‘large’.

They also note that if the Government’s appeal against the Apple ruling were to fail, the €13bn, plus interest, would make more than a small dent in our debt metrics. 

There is obviously a big political dance going on with the European Commission at present — and many people identify the state-aid investigation as merely a bludgeon with which to pound Ireland over the head.

It would be daft to rule out the possibility of Economic Affairs Commissioner Pierre Moscovici drawing up plans for a common corporate tax base, further retrospective investigations into Irish tax arrangements may also happen.

But before we run to the hills screaming about the end of Irish tax sovereignty and the death of Irish industrial policy as we know it, we should perhaps give things some time to settle.

Paul Colgan is economics editor with Ireland Live News on UTV Ireland.

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