Apple's nearly tax-free status in Ireland began in the 1980s when the company set up its operations there and enjoyed significant tax breaks, including a 10-year tax holiday. With the help of Mike Rashkin, Apple structured its finances to minimise tax liabilities effectively. Although the European Economic Community banned such deals in 1981, Apple still managed to benefit from low tax rates through special arrangements. By the mid-1990s, Ireland introduced a 12.5% corporate tax rate, but Apple continued to use various strategies to keep its effective tax rate low, even as it shifted some manufacturing to Asia.
Ireland recently received a €14 billion windfall from Apple after the European Court of Justice ruled that Apple had unfairly benefited from illegal tax breaks. This amount represents about 14% of Ireland's annual public spending and gives the Irish government several options for its use.
One option is to use the entire €14 billion to reduce the national debt, which stands at €181 billion. This could cut the debt by almost 8%, potentially lowering interest payments and providing more fiscal flexibility. However, with Ireland's debt being relatively manageable at 60% of national income, there’s less immediate pressure to take this route.
Another possibility is to invest in infrastructure projects. Ireland's booming economy has left its infrastructure—especially in housing, energy, and water—lagging behind. Taoiseach Simon Harris has suggested that focusing on public works could be beneficial. Yet, with the country nearly at full employment, there's a risk that increased construction spending might drive up labour and material costs, causing inflation.
A longer-term strategy could involve putting the funds into Ireland’s sovereign wealth fund. This move would help accelerate growth towards its €100 billion target by 2035, ensuring a robust financial reserve for future economic downturns.
Despite this large influx of cash, Ireland’s tax landscape has shifted since the "Double Irish" tax loophole was closed. The country now adheres to the OECD’s global minimum corporate tax rate of 15% for large multinationals. While Ireland has adjusted its tax strategy, it remains an attractive location for businesses due to its skilled workforce, EU membership, and other favourable policies.
The government is currently considering the best way to use this unexpected financial boost, balancing immediate infrastructure needs with long-term fiscal planning.