ALISON O'CONNOR: The core issue of Apple’s ‘unpaid’ €13bn is our love of the tax deal

The European Commission has concluded that Ireland is owed €13bn by Apple in unpaid tax. Picture: Sam Boal

As Prof Joseph Stiglitz said, the State knew what it was doing in agreeing Apple tax deals, writes Alison O’Connor.

 

August is usually a quiet news month. This year, though, Ireland has hit the international headlines twice in as many weeks. Neither case would come under the Tourism Ireland definition of positive publicity.

Our first brush with international notoriety was the rumble in Rio, with the arrest of Olympic chief, Pat Hickey, and the allocation of Irish tickets. Mr Hickey has yet to go through the Brazilian judicial process, and has not been found guilty of any wrongdoing, but the reputational damage done to Ireland will stick.

Pat Hickey
Pat Hickey

This week, we’re back at the centre of global attention with a story that seems too absurd to be true; the Irish Government has been told by the European Commission that it is owed more than €13bn by Apple.

But, in response, the US tech giant says it has been told by the Irish Government that it doesn’t owe a cent. All this when we are just coming to terms with the new concept of “Leprechaun economics”, as described by Nobel Prize-winning economist, Paul Krugman, after official figures, earlier in the summer, showed our economy grew by an extraordinary 26%. At that time, a raft of experts explained why that official figure did not reflect reality.

But the Apple development is Looney Laughable Leprechaun Economics. Events have presented a further opportunity to dust down that other taxation-related phrase that reflects so well on our probity with the international community: the Double Irish. Taoiseach Enda Kenny once said: “Paddy likes to know what’s going on”. The rest of the world might adapt that phrase to something along the lines of: “Paddy likes things a little bit hookey, if he thinks he can get away with it”.

There is little that could match the high dudgeon of our politicians, as they expressed their outrage over that commission decision and the whopping figure involved. This is, indeed, a politically disastrous situation. But it is not like we ended up here by accident. This has all been entirely by political design.

As Joseph Stiglitz, former chief economist at the World Bank, said on RTÉ on Wednesday, the State knew what it was doing in agreeing tax deals with Apple.

“You were encouraging tax-avoidance. You knew it... you got a few jobs at the cost of stealing revenues away from countries around the world and that’s the kind of activity that has to be stopped.”

It’s been whispered this week, loudly, that the not-so-secret agenda of our jealous EU neigbours relates to our 12.5% corporate tax rate, especially since there is disagreement over whether the commission has actually over-reached itself by interfering in the tax affairs of a member state. We will never know the truth of that, but it is certainly a likely factor.

We do rather set ourselves up for this, almost handing our neighbours the stick with which to beat us.

Looking at that ludicrous 26% growth-rate figure, it is easy to forget the financial state we were in up to a very short time ago. Our economic reputation lay in tatters and the figures were there to prove our epic mismanagement. Remember that massive housing boom, which we all believed would continue forever?

We shook our heads afterwards, during the austerity years, and swore it would never happen again; that we would find ways of making money that would not disappear in a puff of smoke.

But we’ve now forgotten those economic AA meetings, where we promised to stay financially sober, allowing the temptation of the fast-buck tax deal to dazzle us once more.

The Double Irish is being phased out, but its legacy was evident this week. The Government’s effective response — that it would rather a ship full of toxic nuclear waste to land into the middle of Kildare St than the threatened €13bn — says it all.

The threat to appeal this decision is in keeping with Fine Gael, in terms of its “kick the can down the road” approach. It is only a matter of time before they tell us they have appointed a retired judge to investigate the matter.

Whatever about the politicians rallying round, it was disturbing to hear a senior member of the Revenue Commissioners, on Morning Ireland, on Wednesday, defend what occurred and say Revenue collected the full amount of tax due from Apple, in accordance with Irish tax law.

The core issue of Apple’s ‘unpaid’ €13bn is our love of the tax deal

When last did we hear Revenue discussing an individual case on the airwaves? Why did Revenue feel it should speak out now?

Funnily enough, shortly afterwards, we heard Public Expenditure Minister Pascal Donohoe argue: “This is not just the assertion of Government, but of an independent body, the Revenue Commissioners, which impartially implements Irish law”.

We should take that money and put it to good use, towards things like hospitals or schools or infrastructure, but if it goes to paying off our debt, well, that’s better than a slap in the face, isn’t it? Politically, anyway, it is impossible to see how the Government can argue that the money should be refused.

If we didn’t refuse it, we would send out a wonderful signal of a new approach by Paddy and his compatriots. And we do need to start a steady strategic change. We need to think about economic sustainability and how to ditch the dodginess. Is it a lack of self-confidence, that we think we can only be successful when the package we are offering has a number of extra bells and whistles? Would the multinationals really up sticks and abandon us, if we were to bump up the rate to, say, 15%? What they are after is certainty and we could give them that.

The core issue of Apple’s ‘unpaid’ €13bn is our love of the tax deal

I’m reminded of a speech that former US president, Bill Clinton, made during the recession. He was at an event in New York.

He spoke of the profound damage that had been done to the Irish psyche by our economic collapse and our “impacted sense of shame” as a nation.

He offered encouraging words about how we would rise once again and be prosperous. But he added the cautionary advice that we were not to think that “any economic management cannot be improved, and that clever things that we do may not be tinged by a little arrogance carrying seeds of its own destruction”. Bill is a man who knows all about the wrong sorts of headlines. He also knows us well.

As Prof Joseph Stiglitz said, the State knew what it was doing in agreeing Apple tax deals

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