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Apple tax judgment leaves awkward problem for Coalition

Ministers insist that Apple pays a huge amount in both income and corporate taxes
Ministers insist that Apple pays a huge amount in both income and corporate taxes

The Apple tax judgment has left the Coalition with a deeply awkward €14 billion-sized problem.

It has gifted the opposition a simple narrative to sell: the Government refused to accept a giant sum of money that could have been used to make your lives better.

And while the 2016 administration made the call to appeal the original judgment, it is clear that the current Cabinet has been landed with managing the fallout.

Some were surprised that the Coalition did not have a clearer response prepared for the possibility that the European Court of Justice might find that the Apple tax arrangements were illegal and breached state aid rules.

And there remains the outstanding issue, certain to become inflamed during the election, on how the money should be spent.

One minister speaking privately conceded that the timing was not ideal just ahead of a Budget and an election.

A big bag of money should be manna from heaven but its arrival makes it even more difficult to manage expectations at a time when tax revenues are overflowing.

When the surprise ruling landed on Tuesday, Government ministers rushed to defend the decision to challenge the original judgment in 2016.

This was about a cornerstone of Ireland's industrial policy and providing certainty for multinationals.

Essentially, they argued of the importance of standing by multinationals and tax policy and making that declaration publicly.

All ministers stressed that this was a legacy problem, with Taoiseach Simon Harris characterising the decision as the conclusion of a "historical issue".

Another plank of the defence is that Ireland’s tax practices have been cleaned up and there are no other nasty surprises lurking.

And they underlined the link between foreign direct investment and job creation as Fianna Fáil leader Micheál Martin stressed the importance of Apple as a long-time employer in Cork.

Sinn Féin accused the Government of gross incompetence and recklessness in fighting the case.

While the Social Democrats said they had put corporate interests over the public interest and wasted the opportunity to invest in critical public services.

And there is also the not inconsiderable amount spent on fighting the case. So far, €10.3m has been spent on legal and consultancy fees. And the process is clearly not over yet.

Given that the money will not land until after the general election, the question of how to spend it will be dealt with by the next administration.

This has not been lost on ministers with one saying that it was a bit sickening that the next Government would walk into a "bounty of riches".

But there is a political imperative for the current Government to outline a clear plan.

All ministers repeated a mantra, which had been agreed. The €14bn is not for day-to-day spending as it is a once-off.

The news also unleashed many memes on what could be done with €14bn.

It could fund 38,000 bike shelters at Leinster House, six Children’s Hospitals or nearly 33,000 three-bedroom homes.

The Opposition also rushed to offer suggestions on what could be done with such a massive sum.

Sinn Féin very much underlined that the money could help ordinary taxpayers by providing housing and infrastructure

In addition, Labour said the some of the money could be invested in a better national retrofit and sustainable energy campaign.

And while the Government has stressed that the development demands careful consideration, both the Taoiseach and the Housing Minister Darragh O’Brien have indicated that future housing provision could be a good use for some of the windfall.

All three Coalition parties are talking about earmarking most of the money for infrastructure, including energy and water projects, as well as housing.

In order to signal prudence, some money may also be squirrelled away in the new Future Ireland Fund along with another portion for paying down debt.

But ministers will be aware that chiseling away at Ireland’s €220bn debt pile may not hold much popular appeal versus the tangible and visible benefits of investing in something like offshore wind and ramping up the housing budget.

Although, the reality is that money alone will not solve housing. And there is an added danger that pumping even more money into such spending could risk overheating the economy.

Another vulnerability for the Government is on the broader question of tax justice.

Social Democrats Finance Spokesperson Róisín Shortall said the case highlighted the ability of corporate behemoths to legally avoid billions in tax payments.

And she pointed the finger squarely at the Government for facilitating the arrangement.

"Instead of suing to defend the rights of multinationals to pay a pittance in tax, the Government should be bolstering its efforts to ensure multinationals pay their fair share."

Ministers have batted away this argument insisting that Apple pays a huge amount in both income and corporate taxes.

On the reputational issue, views are mixed on whether this is bad for Ireland.

Some believe the tarnishing of the country as a tax haven is mostly historical. However, others have said this reflects poorly on Ireland.

On Coalition unity, it was clear this week that the three parties have held a firm, united position on the issue.

This is in sharp contrast to the intense jockeying over Budget measures as Coalition parties rush to claim ownership of good news not even yet announced.

In the past week, there have been solo runs from Fine Gael on higher stamp duty for bulk buying housing, the Green Party on benefits for newborns, and Fianna Fáil on a range of Budget demands.

Coalition members seem to be sprinting to the finishing line as the carefully crafted cohesion of recent years appears to be breaking down.

And while Budget season always brings some jostling and kite-flying, there is no doubt the timing of this one ahead of an election has intensified the competition.