Why are [some] Irish politicians so reluctant to take Vestager’s €13 Billion and run?

Margrethe VestagerSo today should be interesting in Dublin. It should be a make your mind up day for the Irish Cabinet to decide on whether Ireland should, as a member state, challenge Tuesday’s ruling of European Commissioner for Competition Margrethe Vestager.

It could fall in several ways. It may force the government to assemble a water tight argument on the politically embarrassing tax justice issues involved in launching an appeal, or perhaps defer the pain by looking to the court to seek clarification rather than a full on appeal.

But the opposition is unlikely to be in a mood for compromises.

Sinn Fein has set aside all mentions of sovereignty, and is going all out on the tax justice issue, frantically making hay with the ‘sweetheart deal‘ question from Paschal Sheehy’s epic interview with Tim Cook yesterday on Morning Ireland.

Fianna Fail is playing it more cautiously: not surprisingly given the deal originates in their period of government. But McGrath’s statement that “it is vital we have a corporation tax regime that is built on certainty”, was echoed in Tim Cook’s line about a need for consistency.

As I mentioned the other day, the whole thing is very awkward for Ireland, now effectively in the middle of a fight between the European Commission, the United States and Apple itself, which has been holding out for another US tax holiday before bringing home its global cash.

So why are FG, and FF in particular, being so stubborn in pushing back on a big free payment of cash money?

One is they don’t think Vestager’s €13 Billion figure will ever be paid directly to Ireland. Indeed, she quite specifically notes that:

If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland. [Emphasis added]

Instead, they view Vestager’s offer as a carrot on the end of a stick in order to lure the earnest and the gullible but which in the event of a Commission win will be withdrawn and the stick used to punish the Irish for being too clever with taxes for their own good.

Secondly, the cash sum even if it is paid out in full into Ireland’s current account (without the usual restriction that windfall payments be used to pay down debt rather than invested) it can’t be as valuable as an actual FDI presence and ongoing investment.

Jim Tankersley in the Washington Post:

There are two big issues here, for policymakers at every level of government. One is about companies that don’t have much leverage: small businesses or businesses that only exist in an entrepreneur’s mind. Those companies are the losers when big companies are taxed lower than everyone else. That’s a key argument European officials made in targeting Apple.

The other issue, though, is transparent incentives. Existing companies rationally want to minimize their tax bills, and lawmakers rationally want to maximize economic growth in their areas. Those forces push toward better and better tax deals for the biggest companies. They are the reason Ireland’s relationship with Apple is worth $220,000 per job, if the alternative is no jobs and no investment.

So long as companies have that much leverage, the math will keep working in their favor. [Emphasis added]

I’d add, that if you go right back to 1980 and the decision to site Apple in a Cork that was then a very poor second to Dublin in terms of suitability for the kind of inward investment the city now enjoys, it has been a rare transformative cross-generational experience.

Being seen to be on the wrong side of a tax justice question is hard, and especially hard for the government’s independent Minister’s some of whom have careers built on fighting the local effects of ill-distribution of wealth and resources within the Irish state.

But, then again, they are no longer just fighting for the Parish. If the cabinet fails to agree, the opposition in Leinster House will begin preparing for a second general election well within the year. That might be just enough to concentrate minds.

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