Last week, Apple lost a major court fight in the EU over a €13 billion (A$21.42 billion) Irish tax bill.
The EU’s Court of Justice in Luxembourg backed a landmark 2016 decision that Ireland broke state-aid law by giving Apple an unfair advantage.
The company now expects to record a one-time income tax charge of about $10 billion (A$14.82 billion) in the fiscal fourth quarter ending September 28 as a result of the ruling.
The funds have been accruing interest since the amount was paid by Apple into an escrow account.
The Irish government said in July the total value of the fund stands at €13.8 billion (A$22.74 billion), after generating €400 million (A$659.08 million) in 2023.
It’s also landed Ireland in a position where it now needs to decide how it is going to use the windfall.
Irish Prime Minister Simon Harris said his country has “exciting opportunities” as it considers how to spend the amount.
The amount is equivalent to 14 per cent of government spending this year, or around €2,700 (A$4,448) for every person in the country.
One of the things that the government could do is use the amount to reduce its national debt.
At the end of last year, government debt was about €181bn (A$298.23 billion). Using the entire amount on debt repayment would reduce it by almost 8 per cent.
While there is an advantage to doing so as it would reduce the country’s debt interest amount, Ireland may not be too focussed on that since as a proportion of national income, its net debt is about 60 per cent compared to the UK where it is about 100 per cent, according to the BBC.
Another area where the government could focus its efforts is on the country’s infrastructure. Significant investments are required in energy, water and housing.
Harris has suggested that is on the agenda saying: “There are clear areas where it would merit consideration around infrastructure, housing and other areas where there are constraints.”
However, Ireland is close to technical full employment and so there may be a potential difficulty with the lack of construction workers. Trying to spend a lot on construction in the short term could just fuel inflation.
Another thing that Ireland could potentially do is invest the amount. The Irish government has already begun the process of establishing a €100 billion (A$164.77 billion) sovereign wealth fund and a second €14 billion (A$23.07 billion) fund to protect infrastructure spending during economic downturns.
From 2024 until 2035, an amount equivalent to 0.8 per cent of GDP will be paid into the main fund each year. Potentially, the fund could be as large as €100 billion (A$164.77 billion) by 2035.
Ireland’s spending in the budget for 2025 will be announced October 1. But Irish Finance Minister Jack Chambers has already said that the windfall will not have an immediate effect on the coming year’s spending. “This will not impact on the parameters already set out for Budget 2025,” he told reporters.
