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Ireland reaps benefits of Apple's tax schemes, even without EU bounty

Spending increases in nation's budget for 2017 driven by corporate tax increase

Even without the €13bn tax bill which Ireland was told collect from Apple, the nation's arrangements with Cupertino is driving tax revenue and spending increases in its budget for 2017.

The Irish government has this week put forward its budget for the next year, including an extra €1.3bn package of spending increases and tax cuts which arrive as the nation seeks to prepare itself to deal with the plummeting value of the Sterling and other potential Brexit fallouts.

Key amongst the budget proposals was an unchanged corporate tax rate of 12.5 per cent, which has continued to drive investment in the nation, especially from American technology firms.

Earlier this year, the European Commission declared that tax arrangements with Apple were in breach of state aid rules, and demanded that Ireland collect €13bn from the company.

The Irish government was quick to appeal against the demands, however, assessing the Commission's ruling as posing a threat to its ability to encourage domestic growth and investment brought in through corporate tax on the firm, who has recently moved all of its IP to subsidiaries located in the country.

Indeed, according to the Irish Examiner's Eamon Quinn, this budget and the budget for 2016 could be called the Apple Budgets due to the role that corporate tax receipts have played in funding increases.

The 12.5 per cent corporate tax rate managed to bring in €6.87bn in 2015, more than €2bn than what had been anticipated. "That is a staggering bounty," wrote Quinn, who warned that more transparency was needed when budgets were being funded "disproportionately on a single tax source — corporate tax revenues".

The increase in spending has been criticised as being beyond what is prudent by the head of Ireland's Fiscal Advisory Council, John McHale, according to the Irish Times, but it was largely welcomed after years of biting austerity measures.

The budget watchdog also warned that the plans were set to place Ireland in breach of European Union rules regarding the reduction of its structural deficit, now being reduced by only 0.3 per cent and not the 0.6 per cent the EU demands.

McHale added that an additional breach regarding allowable expenditure growth was taking place, but claimed that the breaches were not large enough to bring fines from Brussels.

The finance minister, Michael Noonan, explained that “Brexit has increased risk to the Irish economy and, as well as introducing specific measures to assist particular sectors of the economy, we must also put in place safety nets to protect us against future economic shocks.”

Noonan responded to McHale's claims by saying the budget was "prudent fiscal policy" and explained his expectations that the country's budget deficit would fall to 0.4 per cent of GDP in 2017, down from the whopping 32 per cent of GDP that had been the case when he took office in 2010. ®

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