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What Apple’s Win against the EU Could Mean for Ireland’s FDI

A top EU court ruled in favor of Apple in a tax dispute with the European Commission. The decision was welcomed by the majority of Ireland’s business community.

In 2016, the iPhone maker appealed a verdict that would require the company to pay 13 billion euros (15.5 billion) in back taxes, which the court backed in July.

While another appeal by the European Union is still possible, the news has brought a sigh of relief as another stand by the court could have had dire effects on Ireland’s economy.

Such high taxation could have meant a negative change in economic news. That was due to reduced attraction of Ireland as a suitable destination for multinational firms.

Ireland charges a low corporate tax rate of 12.5%. It has influenced the growth of foreign direct investment FDI. Which has been a major part of its industrial development strategy for decades.

FDI accounts for over 245,000 jobs in Ireland, with more than 175,000 of those coming from American Companies.  Apple has set up its large scale operations in Cork. While Facebook, Google, and Twitter have their companies in close proximity in Ireland’s capital Dublin. Meanwhile, Amazon has also announced plans to increase its Ireland operations that will grow staff to 5,000.

According to Lucinda Creighton, former Irish Minister of State for European Affairs, the ruling has brought a sense of victory to Ireland.

“Obviously, it was a huge relief to the Irish government. There was a sense of victory and triumph in terms of taking on what was regarded as an overreach by the EU commission.”  Stated Creighton.

 

FDI Strategies Stand To Be Affected Post Coronavirus

Despite this victory, Ireland will still face challenges in foreign multinational companies’ attraction strategy.

According to a May report by the OECD, FDI will fall internationally by 30% to 40% as many companies are re-evaluating their foreign manufacturing strategies to focus more on domestic production.

In addition to the devastation of the global economy as well as individual economies, most of which are in a recession, the ruling will go a long way to give Ireland an upper hand. Thus, ensuring Ireland keeps its doors open to foreign corporate investments.

Ireland would not have felt the taxation changes overnight. But, the country’s long term plans would have been the most negatively affected says Peter Vale, from Grant Thorton.

“Had it gone the other way, it would have been really bad. None of this happens overnight, even though things can move quickly. It would have given people cause to worry.”

Foreign companies in Ireland have said that apart from favorable taxation, there’s easy access to talent as well as the EU market.  However, the most attention comes from its tax regime. Tove Maria Ryding  also added that there’s a disparity in profits data and actual activity.

“Apple has created thousands of jobs. But compared to the amount of profits that Apple has booked in Ireland, there’s a complete mismatch between the amount of economic activity that Apple actually has in Ireland and the amount of profits that run through Ireland.” Said Ryding.

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