Business Irish

Sunday 4 December 2016

'Leprechaun Economics' not all down to Apple move, insists CSO

Published 09/09/2016 | 02:30

Apple CEO Tim Cook launching the iPhone 7 on Wednesday in San Francisco, California. REUTERS/Beck Diefenbach
Apple CEO Tim Cook launching the iPhone 7 on Wednesday in San Francisco, California. REUTERS/Beck Diefenbach

The Central Statistics Office (CSO) has insisted a "mix of factors" was behind the shock 26pc surge in the size of the economy reported earlier this year, after experts claimed the hike was triggered by Apple rejigging its global tax structures.

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In July official CSO figures showed the Irish economy had grown by an unprecedented 26pc in 2015 - more than three times faster than first thought.

The figures raised eyebrows at home and abroad, casting doubts over the reliability of standard economic measurements.

Nobel Prize-winning economist Paul Krugman even described the phenomenon as "Leprechaun economics."

Yesterday, the 'Irish Examiner' claimed that the massive swing in Irish GDP figures as well as this year's surge in corporate tax revenues was mostly caused by Apple.

It cited research by Karl Whelan, professor of economics at UCD, who said a large part of the surge was attributable to the rearrangement of Apple's tax affairs.

Read more: 'This finding does not stand by a small country' - Taoiseach launches scathing attack on EU Apple tax decision

In 2015 the company shifted a swath of its massively valuable intellectual property rights that were previously held abroad to Ireland and so dramatically boosted the size of the Irish economy, according to the report.

The hike in the size of the economy is important, not least because it's used to calculate Ireland's bill for membership of the European Union and other global organisations.

In July, officials at the CSO refused to provide precise details about what had caused the surge but said the hike reflected a number of factors.

Internationally, Ireland's reporting of off-the-scale growth served to fuel suspicions that the economy here was benefiting at the expense of other developed nations from a looser tax regime.

According to the CSO, these included foreign corporations establishing themselves as Irish, the large and growing scale of the aircraft leasing sector and a technical rule that means work done abroad by Irish-headquartered companies is counted in the Irish data.

Last night, CSO statistician Andrew McManus insisted that the earlier guidance had been correct.

"There were a number of factors involved. That was the situation then and now," he said.

In relation to Apple, he said the CSO would not discuss any individual company or case.

Without a more detailed breakdown of the 2015 data, however, the figures are likely to remain contentious.

One particular issue is that the reported 26pc rise in the size of the overall economy in 2015 wasn't matched by a similar rise in employment or in most types of tax receipts.

Corporation tax income has surged in the past two years however, indicating that corporate level action by multinationals, not real growth, is behind the enigma.

The State's own budget watchdog, the Fiscal Advisory Council noted this week that Ireland's corporate tax take is highly unpredictable and volatile - blaming a number of factors, including the degree which receipts are concentrated among a small number of firms and subject to "idiosyncratic shocks" such as the 'patent cliff' and company restructuring and inversions.

That all makes the standard approach used by the Department of Finance to forecast corporation tax noticeably unreliable - with implications for the State's ability to set budgets.

Irish Independent

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