Ratings agency Fitch has said the European Commission’s decision that Ireland is to collect €13 billion in back taxes from Apple will have “mixed implications” for the country’s credit profile.
In its assessment, Fitch said: “It could result in a substantial one-off improvement to Ireland's fiscal position, but may also add to medium-term economic uncertainty and increase political risks.”
It said if the payment – which could amount to around 5.1% of last year’s GDP figure – were collected by the Government and used to pay down debt “this would accelerate the improvement in public debt dynamics that has been driven by fiscal consolidation and robust nominal growth”.
Fitch estimates Irish State debt – excluding the impact of the Apple ruling – will fall to 63.7% of GDP in 2020, down from 78.7% at the end of last year.
The ratings agency added that any benefit from a payment by Apple to the State would be “partly offset by increased uncertainty over Ireland's attraction to global businesses potentially damaging FDI and employment”.
However, it thinks this risk is limited and Ireland’s low corporate tax rate coupled with other factors “should keep the business environment attractive to multinationals”.
Fitch also pointed to the perceived instability that has emerged in the minority government over the Apple ruling and said “a more unstable political backdrop would add to fiscal and economic risks”.
