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Apple Inc. (AAPL) Irish Tax Case Poses Big Dilemma For Ireland

Apple Inc. (NASADAQ:AAPL)

Apple Inc. received huge tax benefits in Ireland, but recently European officials issued an order to Ireland to collect back taxes worth $14.5 bn. However, it’s not Ireland that wants Apple to pay billions. The Irish government is appealing Europe’s tax ruling, exposing a rift in a country that has not yet recovered from the aftershocks of years of harsh cutbacks, notes a report from NY Times.

Ireland – what it wants with Apple

“The Irish government’s defense is a mixture of financial realpolitik, national pride and damage limitation,” notes the report. The decision of the European Union, takes direct aim at some of the generous tax policies of the country, and in Apple’s case refers to them as ‘illegal incentives.’

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At the same time, local lawmakers are afraid that if they will take billions from the tech giant, it would discourage other multinationals from investing in Ireland. There are many in the country, who do not like European officials meddling with the country’s tax policies, the report notes.

Apple Inc. is also appealing, and is calling the case ‘politically motivated.’ Also, Apple CEO – Tim Cook, in an interview with the Irish broadcaster RTE, defended Apple’s tax practices. “When you’re accused of doing something that is so foreign to your values, it brings out outrage in you.”

What’s the dilemma?

The payday is too big to forgo, and hence, it has attracted criticism from left-wing lawmakers, local Apple fans and government workers as well. As per European officials, Apple’s tax bill might rise to $21.3 billion on adding interest to it.

Ireland could use the money to fund hospitals, schools and other social programs. Ireland took measures such as reducing government salaries by double-digit percentages, halting investment in public works and introducing a series of new taxes, when it was at the height of austerity. The downturn led to a broader identity crisis in Ireland, and the tug of war over Apple Inc. ’s money is part of that only.

And, though the country has recovered from the recession, it only adds to the debate. For Ireland, much of its recent growth comes from financial maneuvering instead of longstanding improvements in the domestic economy.

On the other hand, a fact that can’t be ignored is a major portion of Ireland’s long-term economic growth is related to enticing international companies with flexible working conditions and low taxes. As per government statistics, about 20000, or around 10% of the total work force are working in overseas companies.

Ireland hopes to entice even more. Britain voted in June to leave the European Union. Since then countries around the region are lining up to woo companies as they think about leaving Britain, the report notes.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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