Ireland’s embarrassment of riches

Yesterday, the European Commission ruled that Apple owes the Irish government €13 billion ($14.4 billion) in unpaid taxes from 2003 to 2014, plus interest. The ruling caps off a lengthy legal battle that began in 2016 — which has been appealed multiple times following various court rulings — and it marks a significant victory for EU antitrust chief Margrethe Vestager.

Most remarkable in this otherwise dry bit of tax-related news is that the Irish government has been spending millions on ensuring that it didn’t get paid the tax. Indeed, Irish officials have spent years sticking to the party line: that they don’t give preferential tax treatment to companies and that they didn’t think Apple owed them anything.

The emerald isle

With a population of 5.3 million, making it slightly larger than Alabama, Ireland now finds itself in the enviable position of figuring out how to spend this windfall. And policymakers have already been debating what to do with their third consecutive budget surplus, which was some $9.5 billion last year, because Ireland’s corporate tax receipts continue to soar.

And the country is on track to collect even more this year.

On Sunday, the Irish Times reported that Ireland’s corporate tax receipts are tracking 28% higher in 2024 than they were at the same time last year, as the country continues to experience what one economist, Dermot O’Leary, described as “an embarrassment of riches.”

There goes that dream

In the late 1990s, Ireland began cutting its corporation tax, a policy that transformed it into a haven for multinational corporations like Meta, Alphabet, Apple and Pfizer. In the intervening years, the country’s economy has become one of the most interesting in the world.

The influx of corporate activity has been so extreme that it’s led to a distortion in the country’s GDP figures, as these companies often generate huge paper profits within Ireland. In 2015, a simple shift of Apple's intellectual property assets resulted in a 26% GDP gain for Ireland — the highest ever recorded in post-war Europe.

Ireland is a wealthy country, but this phenomenon paints a somewhat deceptive picture of the nation's true economic reality. For most countries, GDP is the go to measure of output. That measure is often similar to Gross National Income (which excludes profits sent abroad). Not so for Ireland.

Ireland’s Central Statistics Office has gone even further, developing a bespoke index called GNI* (GNI Star) in an attempt to strip away the outsized influence of multinationals on its economic figures. This strips out depreciation on Intellectual Property, leased aircraft, and the income of redomiciled PLCs. Those adjustments make a very big difference: Ireland’s GNI* is estimated to be about a quarter lower than regular GNI.

Spending spree

Although many of the profits that flow through Irish multinational bank accounts have no real impact on the lives of everyday Irish folks, the taxes collected on (some) of those profits are very real.

Ireland’s finance minister said the government would “carefully consider” what to do with the sudden windfall from Apple, but, as you might imagine, politicians already have big ideas for what to do with the enormous sum, which is equivalent to some €2,450 (~$2,700) per Irish citizen. Some want to spend it on housing, education, or infrastructure, while others are advocating to save more of it for the future.

In August, Ireland’s Finance Minister signed a commencement order to set up the country’s new sovereign wealth fund, an arrangement not dissimilar to Norway, which is one of the world’s largest investors thanks to its national fund.

In case you were concerned about Apple in all of this... don’t worry. There aren’t many entities in the world that can brush off a bill of this size, but Apple is one of them — analysts expect the company to report more than $100 billion in profit this fiscal year.