Cantillon: Is Apple at core of Ireland’s tax windfall?

That Ireland is experiencing a veritable tsunami of corporation tax receipts is both a reason to be cheerful, and a worry.

At €4.78 billion in the year to the end of October, corporation tax receipts are a whopping 73.8 per cent ahead of where they were expected to be at the start of the year. Given that total tax collected between January and October is €35 billion, the “extra” €2 billion is material.

As reported yesterday, the Revenue Commissioners has told the Government the unexpected cash is due to strong trading conditions, rather than one-off factors.

Apple, which published its 2015 accounts last week, makes enormous use of Ireland for its global tax planning. It booked foreign, ie non-US pre-tax earnings of $47.6 billion in financial year 2015, a year when its total pre-tax profits were up 35 per cent, to $72.5 billion. In its accounts it says that "substantially all" of its $91.5 billion in accumulated non-US profits that it does not intend to repatriate to the US, were "generated by subsidiaries organised in Ireland".

So given its size and the way its tax affairs have been scrutinised in Washington DC, are being investigated by the European Commission, and may have been affected by Ireland’s decision to close down the use of Irish companies that might be “stateless” for tax purposes, it would be understandable for people to think of Apple when reading about Ireland’s surge in corporation tax receipts. Is Apple at least part of the explanation? If so, what exactly are the factors behind it? Or maybe the surge has to do with the big pharma companies, or is an early indicator of fallout from the OECD’s Beps project?

Beps is seeking to close down the booking of profits in non-tax locations such as Bermuda and the Cayman Islands, and some observers have been wondering if, as a result, Ireland might see an increase in the profits being booked here.

The worry, of course, is that we can’t know how the redesign of the international tax system will affect Ireland until the dust settles. Given that so much of what is happening centres on US tax rules, and the apparent political paralysis that exists there in terms of corporation tax reform, it looks as if it will be quite some time before the dust clears.

Meanwhile, the wisest use of any windfall might be to pay down our debt.