Business Irish

Tuesday 19 September 2017

From Dublin to Silicon Valley: how Kenny and ministers wooed tech giants

Google’s Irish HQ on Dublin’s Barrow Street Picture: PA
Google’s Irish HQ on Dublin’s Barrow Street Picture: PA

Cormac McQuinn and Gavin McLoughlin

Michael Noonan does a good routine in folksiness. When the European Commission said Ireland had given Apple a sweetheart tax deal, Noonan said collecting the billions supposedly owed would be like "eating the seed potatoes".

It's an expression that's probably not familiar to many attendees at the World Economic Forum at Davos, the gathering for the world's rich and powerful. With Ireland's economic model so dependent on foreign direct investment, the Davos summit is a useful opportunity for Irish politicians to network with executives at big multinationals and make Ireland's pitch.

And so it was that Noonan found himself invited to Sheryl Sandberg's cocktail party at Davos. Attendees were to be treated to a showcase of some of Facebook's "breakthrough technologies in virtual reality and artificial intelligence", according to Noonan's invite. "Kindly be aware the evening is off the record," it added.

Noonan spoke to Sandberg that night but was limited to "a cordial greeting" at the "well-attended and busy event" a spokesman for the Department of Finance said. The invitation emerged among records released to the Sunday Independent under the Freedom of Information act, which provide fresh insight into the interactions between our lawmakers and bosses at some of the biggest companies in the world. What do the companies ask about, and what do our politicians tell them?

Some months before the cocktail party, Noonan was in San Francisco and met a different set of Facebook executives at their Menlo Park headquarters. The company's CFO Dave Wehner and vice-president of tax Jue Lin were among those present, according to a Finance Department summary of the November 16, 2016 meeting authored by Nicholas O'Brien, assistant secretary general with responsibility for the EU & International division.

His report on the meeting, which had been arranged by the IDA, reveals that Noonan "outlined developments" on the Apple tax case to Facebook.

It wasn't all they discussed. Among other issues Noonan noted Facebook's commitment to Ireland, including its under-construction data centre in Clonee, Co Meath.

The report says Wehner spoke of "a very strong relationship with Ireland and the positive investment climate which encourages the company to continue to invest".

However, the European Commission's State Aid ruling was brought up as it has been at other high level contacts with other multinationals.

To recap, the Commission found that Ireland had given "illegal tax benefits" worth €13bn to Apple since 1991.

"Member states cannot give tax benefits to selected companies - this is illegal under EU state aid rules. The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years," the EU Competition Commissioner Margrethe Vestager said.

She added: "This selective treatment allowed Apple to pay an effective corporate tax rate of 1pc on its European profits in 2003 down to 0.005pc in 2014."

The decision was greeted with fury in Dublin, but also with fear. It was seen as an attack on Ireland's tax sovereignty - crucial to our FDI-heavy economic model and something that could scare off multinationals.

Facebook would not comment on the meeting with Noonan but a lengthy statement from the Finance Department indicates the Government's appetite for defending its position has not faded.

"The Government profoundly disagrees with the Commission's analysis and had no choice but to take an appeal to the European Courts to annul the whole Decision ... our position on all aspects of the case is very well known," it said.

"Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers." The statement said that in all cases where Noonan has discussed the state aid case with external parties, it has been limited to information that is already in the public domain.

"We regularly interact with companies who have substantial presence and employment in Ireland and who have a legitimate interest in the allegations made by the EU Commission and the potential implications for their businesses. They may have concerns stemming from the case. Such concerns might be understandable but would be unfounded," the statement said.

One company that had some questions at the very least is Google. In September last year, Taoiseach Enda Kenny met a delegation from the tech giant. Caroline Atkinson, the company's global head of public policy was present alongside then-Google Ireland boss Ronan Harris and others. Minutes of the meeting drawn up by one of Kenny's officials show that Atkinson asked the Taoiseach for a briefing on the Apple tax case.

The minutes say that Kenny spoke of "the Government's intention to appeal on the basis that there was no deal or special treatment".

"He [Kenny] recognised the importance of certainty for enterprise and investors, and the difficulty the case created in that respect."

A spokesman for the Taoiseach said the meeting - held in Government buildings - "took place at Google's request to facilitate engagement between the Taoiseach and one of their senior executives [Atkinson] - who was then visiting Europe and wished to brief the Taoiseach on Google's activities and plans".

"As the meeting took place shortly after the European Commission made its announcement in relation to the Apple case, Atkinson asked in general terms about the Government's proposed approach.

"The Taoiseach set out the position, as he had done the previous day in the Dail," the spokesman added.

Asked why Google had asked for the briefing and whether the Apple case would affect its presence here if the Government appeal fails, a Google spokeswoman said: "We meet regularly with politicians and policymakers on a wide range of issues so that we can better understand the Irish business environment, answer politicians' questions and explain the opportunity for businesses to grow online.

"Our engagements are recorded on the register of lobbying as required under Irish law," the spokeswoman added.

It's understood that the European Commission's state aid ruling against Ireland has no bearing on Facebook's position here, though the company would not comment when asked by the Sunday Independent. In its statement, Google didn't answer on whether it had concerns about the ruling. For its part Apple has previously strenuously denied wrongdoing in relation to its tax arrangements in Ireland. Its chief executive Tim Cook has dismissed the Commission's ruling as "political crap" and Apple is also appealing the decision in European courts.

The Finance Department noted notwithstanding the appeal, Ireland is required by law to recover the alleged state aid from the company.

"We are continuing to make progress of the recovery from Apple with the full co-operation of the company and the EU Commission", its statement adding that the Commission was "satisfied with the progress we are making".

Aside from the Apple tax ruling, Brexit and the cost and availability of housing are issues that are prompting questions from multinationals, according to an official's note on a visit by European Affairs Minister Dara Murphy to the US in January.

"Brexit was raised as an issue at every meeting, especially for companies that do not have their European base in Ireland. The uncertainty caused by the question of the UK's post-Brexit approach to data protection standards was raised at most meetings.

"Issues relating to availability/cost of housing were also regularly raised," the note reads. Kenny's spokesman said Google didn't raise the issues of housing or visas.

Brexit - and its possible implications on the EU's Digital Single Market (DSM) project - was also raised at a December 20, 2017 meeting between officials at the Taoiseach's office and Google representatives including Iarla Flynn, the Irishman who is the search engine's director of public policy and government affairs for Northern Europe. The minutes indicate a view on his part that Ireland - which the Government likes to represent as a utopia for tech - is not best placed to pick up the slack when the UK leaves the EU, and by extension the DSM project.

"On Brexit, smaller MS (member states) will struggle to the role [sic] of the UK in advancing DSM/SM files and providing thought leadership. IF [Iarla Flynn] wondered if Poland could step up to this role," the minutes read.

On this meeting the Taoiseach's spokesman said: "While acknowledging the loss of UK influence on single market issues, we continue to develop stronger alliances with a number of like-minded member states, including through key initiatives at political level ... the Minister for European Affairs continues to lead Irish engagement on DSM matters in line with the roadmap for his responsibilities in this area that was noted by the Government."

Correspondence released by the Jobs Department discuss arrangements for Minister Mary Mitchell O'Connor's attendance at the June opening of Google's €150m data centre in west Dublin. A email sent by the firm had the subject line "Google good news event".

That event went ahead, with the Taoiseach also attending. However, Mitchell O'Connor's later plan to visit Google's city centre headquarters on August 31 had to be cancelled.

The reason? The government's emergency Cabinet meeting to discuss the European ruling on Apple.

That pesky Commission really is getting in the way.

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