Business Irish

Thursday 18 January 2018

Explain this to me in simple language . . .

European Competition Commissioner Margrethe Vestager. (AP Photo/Virginia Mayo)
European Competition Commissioner Margrethe Vestager. (AP Photo/Virginia Mayo)
Donal O'Donovan

Donal O'Donovan

Are we still talking about Apple?

It's the story that won't go away. The latest suggestion shines a fresh light on just why the technology giant matters so much to Irish policy makers, whether the details prove to be entirely correct or not.

What's the suggestion?

Some economists now think that the shock 26pc rise in Irish gross domestic product (GDP) recorded last year may have been caused primarily, if not overwhelmingly, by an internal reorganisation at Apple. According to the theory, Apple moved a significant amount of its massively valuable intellectual property to Ireland in 2015 and the revenue generated by those assets boosted the overall size of the economy.

Why do they think that?

The 2015 data showed an increase of €300m in the value of Irish capital stock - that's the value of things owned here. We know we didn't see a massive surge in new factories, so something else - almost certainly something intangible - was at play. In the modern economy the most valuable intangibles are intellectual properties such as technology patents.

But why Apple?

The truth is no one outside the CSO (and they are not saying) has the full picture. But there are some key pieces of evidence.

Last month, when the European Competition Commissioner Margrethe Vestager (pictured inset) made her controversial decision ordering Ireland to charge €13bn for back taxes, the figure was calculated to the end of 2014.

The Commission said Apple had changed its structure in Ireland in 2015, so what it claims was an illegal tax ruling dating back to 2007 no longer applied.

So we know from the Commission that Apple, the biggest company in the world, made a significant adjustment involving Ireland in 2015. And we know from the CSO that it made a significant adjustment to its calculation of the size of the Irish economy in 2015, even though there was no evidence in terms of jobs growth or domestic spending to indicate sudden growth.

So does this actually matter?

The lack of clarity here is the big issue. We don't know whether Apple did or didn't alter the size and shape of our economy last year because we're not being told. But how can any of us understand, predict and manage the economy if it remains shrouded in mystery?

Irish Independent

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