The Government has tried to pass off the European Court of Justice (ECJ) decision in the Apple tax case as being of “historical relevance only”. And this may indeed apply to some of the issues involved; the tax world has moved on in the meantime and many rules have changed. But the finding that Ireland illegally breached State aid rules is important – and embarrassing – and will do some considerable damage to Ireland’s reputation.
Ireland has long been in the spotlight for its corporate tax practices, even if the focus has sometimes been in the wrong place. The real issues have related to the details of the tax rules and some of the practices they allowed, notably the now-discontinued double Irish regime.
Ireland has changed its tax rules in recent years in tandem with international agreements and has signed up to the new OECD corporate tax deal. This was the right thing to do – and provides some bulwark now against criticism. Nonetheless, the finding of having offered an illegal State aid is serious, even if it happened many years ago.
The Government’s decision in 2016 to appeal the original decision was based, it said at the time, on having to defend the credibility of the Irish corporate tax regime. Now, while the tax rules have changed, it will again refocus international attention on Ireland, though now the more controversial issue is how much is being collected here.
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Ireland has benefited significantly from the first phase of international corporate tax reform, a huge benefit to the exchequer but one that leaves Ireland vulnerable to the fortunes and decisions of big companies. And to policy changes in other jurisdictions, notably the US where tax rules have long encouraged companies to invest overseas and have been a key part of the story of wholesale tax avoidance.
Meanwhile, the discussion will start on what to do with the €13 billion plus interest - there is now some €14 billion in the escrow account - clearly a significant sum of money. It is not a debate the Government will have wanted, ahead of a budget where expectations are already high and a general election campaign which will focus in part on its shortcomings in areas such as housing.
The money should not be used to prop up day-to-day spending, as it is a once-off receipt. There are no shortages of places where it could be used for vital economic and social infrastructure – houses, the energy grid, water services, schools and hospitals. But the immediate problem here is generally not a shortage of cash, but finding the resources to build what is needed. And delivering to budget and on a reasonable timescale.
Clearly caught off guard by the ECJ decision, the Government is mulling what to do. There is enough cash here to underpin vital State investments over the next few years. But the key blockages to delivery also need to be addressed to make sure Ireland gets value for money.