After Apple ruling, should Ireland be worried about what comes next?

Just as Ministers were preparing to cross the threshold of the Cabinet room before Tuesday’s weekly meeting of the Government, word began to filter through.
The Court of Justice of the European Union (CJEU) was delivering its verdict in the €13 billion Apple tax case. Before the meeting – where no phones are allowed due to security concerns and leaking concerns, say the political wags – Paschal Donohoe’s mobile (an iPhone, inevitably) pinged with the news, which he read aloud to some colleagues, according to sources present.
The expectation had been that the CJEU would kick the decision back to a lower court or even back Ireland and Apple’s contention – fought over an eight-year legal saga – that the billions were not owed.
The previous week, the Cabinet had been briefed that the decision was coming and on possible outcomes, but there was no drumbeat of expectation for what arrived. As Ministers filed in, they were beginning to digest that even with the judgment still being read in Luxembourg, many billions were destined for Ireland. They were “completely blindsided by it”, recalled one Minister later.
A 30- to 40-minute discussion was led by Taoiseach Simon Harris, Tánaiste Micheál Martin, Donohoe and Minister for Finance Jack Chambers, with Attorney General Rossa Fanning expressing the surprise felt by all. Ministers were warned: no kite-flying on this – the money would not be available for the budget.
But it was clear: there was a “finality”, as Harris later put it, about Apple’s billions now. It was a fork in the road. But what it all meant, and what comes next, was far from clear.
IDA Ireland, the State agency tasked with courting and comforting foreign direct investment (FDI), is nothing if not polished. Former insiders and current executives in FDI companies say the agency would have dedicated staff both at home and overseas whose job is to listen to each big firm, to make sure they feel loved, and to facilitate access to what is broadly termed “the system” – the overlapping world of government, civil service and state agencies.
But even they had been preparing the ground for a delay, says one person who is on the receiving end of briefings. Overall, the prediction was for more complex legal arguments, further delays and that thorny questions would again retreat into the undergrowth.
[ Justine McCarthy on the Apple tax: Ireland owes its lost people €13bn worth of housesOpens in new window ]
Within the Government, there were even fears that the Apple tax decision could feature in Tuesday’s much-watched showdown between Kamala Harris and Donald Trump in the US presidential debate. Later, a Minister judged that Ireland had “dodged a bullet” when it didn’t come up. It was, after all, a hearing on Capitol Hill back in 2013 when Apple had first drawn attention to its “Double Irish” tax strategy. That was where the trouble started.
The IDA went on a charm offensive, trying to “de-dramatise” the situation. The narrative it was pushing was the same in private as ministers in public: this was a historical case, there was no read-across to the present day, Ireland has cleaned its act up on tax and now competes on other advantages. The problem is that the FDI world has, for some time, been casting a more sceptical eye over the Irish “offering”, as the jargon puts it.
The American Chamber of Commerce Ireland is an organisation that usually avoids sounding interesting in public, yet its statement on Tuesday was laden with warning: “Competition for FDI is heating up and the strategies that won investment in the past will not necessarily deliver in the future.” It was mirroring a series of warnings given by multinationals publicly and privately.
Views differ within the FDI sector on the relative importance of the Apple tax case: one executive says it is of “huge active interest” to Silicon Valley behemoths who “think the EU is becoming hostile to US big tech”.
A second experienced figure disagrees, witheringly comparing the Apple tax case to Northern Ireland: something “that some people are extremely interested in, but most people don’t give a shite”.
Wherever the truth lies, sources within the FDI sector – or those who lobby on their behalf – outlined a near-consensus view last week: the competition is heating up.
On skills and talent, countries have “tried to catch up and have caught up in many ways”, one such figure says. Ireland is also competing against countries from the Middle East and elsewhere that can effectively make cash offers to firms to invest, unencumbered by state aid rules.
Even within Europe, Germany has reportedly offered a multibillion-euro subsidy to chipmaker Intel – a big employer in Ireland – to open a microchip factory, repeatedly referenced by multiple sources.
Regulation, including areas where Ireland is at the sharp end, such as data protection and privacy, sparks fears in firms that Europe could become a cold house for big tech.
[ Ireland’s creditors weigh in as Apple billions poised to shape election manifestoesOpens in new window ]
“What these guys think is there should be no regulation, the EU should f**k off and everyone should buy their products,” says one executive.
Such a dynamic puts pressure on Ireland’s multiple different roles – as a member state, a regulator, but also a host to US firms who “think Ireland should stand up for their interest in the EU”, says one industry figure.
But above all, there is a consensus that Ireland is lagging on infrastructure – power supply and cost, water, chronic shortages in housing, public transport – the list goes on. If Ireland is not competing on tax, it has to be honest about shortfalls where it needs to be competitive, says one Cabinet source.
There is a deep seam of frustration in industry around “execution risk” – the delivery of plans.
“The system has shown, whether it’s bike sheds or hospitals, an inability to effectively deliver,” says one FDI source. The refrain from multiple industries is, according to a person in Government: “How are you going to do the things you are demonstrably crap at?”
If there is a chill in FDI, the numbers don’t show it yet, with employment healthy and corporate tax revenue off the charts. But one business leader, speaking privately, says even “cheerleaders” are flagging concerns, quipping: “Even the roadrunner kept making progress for a while.”
Government sources point to worrying signs: a report on Europe’s future competitiveness from former ECB chief Mario Draghi last week flagged Irish planning for solar and onshore wind as among the slowest in Europe. The Irish Times revealed last week that Cathy Kearney, Apple’s Irish vice-president for European operations, privately warned the Government of “aggressive competition” from other countries trying to lure multinationals away from Ireland.
[ The 10 blockbuster companies behind Ireland’s corporate tax windfallOpens in new window ]
Lobbyists for the roadbuilding industry earlier this month contacted Ministers warning that Transport Infrastructure Ireland had failed to put out tenders for €38 million of €67 million planned for minor investments in roads, with the State agency blaming a funding shortfall even as the exchequer is awash with cash.
Similarly, Uisce Éireann, previously Irish Water, is said to be “squeezed” on its funding commitments for next year, according to a senior source with knowledge of the company’s affairs. It has a multibillion-euro mandate to deliver infrastructure for housing and industry, but the same source says it needs more certainty on funding, adding that when news of Apple’s billions broke, the thought came: “We need to start to steer our guys to get in early on that.”
A spokesman for Uisce Éireann said it is currently engaging with Government, seeking a “multi-annual funding framework”.
Within Government, senior people want the current administration, even in its final phase, to commit to a pre-election pledge to spend on the infrastructural deficit, to ringfence the money for a few areas. One such source says a Government decision should say: “These are the particular infrastructural areas the money will be reserved for, that it’s not going to be used for other purposes.”
“A very big decision that Government is going to have to take is: are we willing to use this money to address the issues that really in the short term will yield little short-term gain, but are essential to our long-term future?” says a Cabinet source.
“The sensible way is to get commitment to top-line priorities in terms of doing it.”
Options under consideration include a sovereign wealth fund which yields hundreds of millions in interest payments, or sinking it into existing “future funds”; simply spending it down on existing projects; or a dedicated fund ringfenced for infrastructural challenges.
Pressure from the FDI sector is expected in the weeks ahead as Harris, Chambers, Donohoe, Martin and Green Party leader Roderic O’Gorman map a route. But competition will be fierce and demands will doubtlessly come to multiples of the available billions.
Ireland Inc is steadfast in its view that Apple is ancient history – and that Ireland faces no further threat from European intervention. But “finality” in the Apple case comes at a tricky moment for Ireland’s industrial policy, for so long pegged on tax.