Ireland’s tax defense is a tired old tune

In 2014, when Brussels regulators began to probe Apple Inc.’s low-tax arrangements in Ireland, an unlikely figure rushed to Dublin’s defense. U2’s lead singer Bono, no stranger to attractive offshore jurisdictions, pleaded that Ireland’s multinational-friendly model had brought the only prosperity the nation had ever known. “We are a tiny little country,” he told The Observer newspaper. “We don’t have scale… We don’t have natural resources.” The future happiness of the Irish depended on keeping companies like Apple in clover.
The Bono defense is a frequent national battle cry in Ireland, deployed to drown out awkward questions about the tax arrangements of Big Tech. It’s not convincing.
When EU ruled in 2016 that, yes, Apple’s tax treatment was illegal state aid and, yes, Ireland did have to collect up to 13 billion euros in back taxes, the Irish leader Enda Kenny rejected the decision. He accused Brussels of overreach and vowed to fight alongside Apple to defend his people’s economic prosperity.
Now Dublin’s appeal against the ruling is working its way through the courts, it’s a reminder of how bad the country’s argument looks. Ireland is spending millions of euros of public money on an appeal to prevent billions of euros from flowing into state coffers, which to Apple would be the equivalent of three months’ profit. Dublin says it just wants to clear its name. But really it’s going in to bat for a practice that netted Apple’s Irish unit a 2014 tax rate of 0.005%. While the loophole that allowed this was closed, thanks to international pressure, others have taken its place.
Is this really in the national interest? The imprint of tech multinationals on the Irish economy is certainly hard to miss: All those shiny headquarters in Dublin’s “Silicon Docks” are evidence of investment and jobs. The Irish economy grew 8.2% last year, and the unemployment rate is below 5%.
But the prosperity of this low-tax, high-trade economy can also sometimes look a little over-dependent on capricious global corporations. Apple’s restructuring of its Irish tax affairs in 2015, which largely involved moving ownership of intellectual property into the country, boosted Ireland’s GDP by a preposterous 26%. Gross national income is barely 80% of GDP. The economist Paul Krugman calls it “leprechaun economics.”
Moreover, the money rushing into Ireland is sucked away from elsewhere. An estimated $117 billion in corporate profits was shifted to the country in one year from higher-tax jurisdictions, according to the Missing Profits research group.
Ireland is right about one thing: It can’t unilaterally become the world’s upright collector of taxes. There needs to be international cooperation to fight corporate wheezes. A change in Irish policy would simply encourage companies to send their money to another tax haven.
—Bloomberg

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbe