Ireland’s Upcoming Budget Offers Chance to Move Past Apple Case

The European Court of Justice’s decision to make Apple Inc. pay Ireland 13 billion euros ($14.5 billion) in back taxes has raised questions about Ireland’s position as a hub for foreign direct investment.

The decision undermines the government’s long-standing position that Ireland doesn’t give preferential tax treatment to any taxpayers, companies or otherwise, and will serve as fodder to those who seek to portray Ireland as a tax haven. That position ignores both the substantive investment and employment creation that Irish corporate tax policy (of which the 12.5% corporate tax rate has long been a cornerstone) has consistently sought to foster.

It also ignores Ireland’s engagement with and transposition of key tax reforms in line with its commitments to the Organization for Economic Cooperation and Development and the EU, including the anti-tax avoidance directives, updated transfer pricing rules, and enhanced controlled foreign company rules.

The timing of the court’s judgment and the start of Ireland’s budgetary process, at least, seems fortunate. The Irish government plans to publish its annual Finance Bill within two weeks of its planned Oct. 1 budget announcement. This will offer an ideal opportunity for Ireland to introduce measures and enhance its corporate tax offering, so the country remains an attractive location for multinational investment.

We could see the introduction of a best-in-class foreign dividend participation exemption from 2025, an area where Ireland has been an outlier up to now, as well as a much-lobbied reduction to the headline capital gains tax rate that is currently one of the highest among OECD member countries. The windfall from Apple’s back taxes won’t be factored into Ireland’s 2025 budget.

Even with the dramatic changes in the global tax environment over the last decade, the ruling against Apple has brought to the forefront again the ongoing discussion and negotiations in relation to global corporate tax reform and the issue of where large multinationals should pay taxes. This is an issue that can only be resolved through stable global consensus, rather than unilateral actions carried out by individual countries.

Ireland entered into the OECD two-pillar agreement in 2021 and has continued to advocate for the global solution and its implementation with a view to providing fair and transparent global taxation, transposing the minimum tax directive in Pillar Two as of Jan. 1, 2024.

While the OECD Inclusive Framework has made good progress on Pillar One, the reliance on US participation means that the deal’s ultimate failure remains a distinct possibility. This would seem to benefit Ireland in much the same way that the Apple case itself has.

The ultimate success of Pillar One is the lesser of two evils from an Irish perspective, a position made clear by the Irish government, compared with the proliferation of digital services taxes and an increased risk of punitive trade sanctions by the likes of the US, home to the large technology companies, in response—being likely outcomes of the Pillar One deal’s failure.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Robert Dever leads the Irish tax practice of Pinsent Masons, advising large domestic and multinational corporations on all aspects of Irish corporate and transactional tax.

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