How Ireland got too much money

Katie Martin (0:09)

Ireland has a serious economic problem. It has too much money. It already had a neared 9 billion euro budget surplus. Its economy grew five times faster than expected last year. And just this week, the European Court of Justice has ruled that Apple must pay it 13 billion euros in back taxes that it doesn't want. Today on the show, I have a special guest here to discuss how on earth do you end up with such a pressing first world problem? And what is Ireland going to do about it? This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in London. And my special little friend today is David McWilliams. David, welcome to the show.

David McWilliams (0:55)

Katie, how are you? Are you short a few quid? You want a loan there, do you?

Katie Martin (1:01)

So if you don't know him, David is that Irish economist guy off of the internet. He's a broadcaster, he's a writer, and he's the founder of what sounds like the worst event on earth, but is actually one of the best. The Kilkenomics Festival, where economics meets standup comedy. You're gonna have to trust me on this, it does work. I'm gonna be out there in a few weeks, and David's special skill is talking about economics in a human way, for humans. David, the floor is yours, tell me in human terms what on earth is going on over there?

David McWilliams (1:36)

In human terms, this is kind of like, it's sort of an extreme first world problem, to have far too much money, so much so that the government is almost in denial about this escrow account, which has 13 odd billion euros in it.

Katie Martin (1:49)

I mean, who's counting?

David McWilliams (1:50)

Who's counting? This is back tax owed to Ireland from Apple, as a result of a little bit of jiggery-pokery about 20 or 15 years ago. It's a long time ago now, where the Apple revenue was routed through a head office that didn't really exist in Ireland.

Katie Martin (2:13)

One of these brass plate jobs.

David McWilliams (2:14)

Exactly, and everyone was looking the other way until somebody stopped looking the other way and started looking, and that was the European Commission. So basically Ireland is on a collision course with the European Commission, which is bad for us because we are and pride ourselves in being Europeans.

Katie Martin (2:31)

You're good Europeans.

David McWilliams (2:32)

Exactly.

Katie Martin (2:33)

We're bad Europeans.

David McWilliams (2:33)

You're bad, yeah, exactly. So had this been something that would have been unearthed in the UK, the Irish newspapers would have been gloating at this. But the fact that it was unearthed in Ireland, there's been a sort of a collective. Well, I'll just say, let's just hope this goes away. But the problem is that Ireland, it's not that it's too much money. The Irish economy has been set up to have a budget surplus. And this sounds very strange. In fact, this is the end result of 20 or 30 years of policy. So if you make your country open to largely American multinationals, if you attract them in on the basis that your tax rate is lower, and if the purpose of the American multinationals is to sell stuff to the European market of 300 million people when you're only 5 million people, it's highly likely that you will end up with a massive corporate tax surplus. This is something that Irish economists don't explain to the world because we don't want to. This is exactly what has happened. So over the last 10 years, the corporate tax take in Ireland has been rising very, very quickly. And it is largely, not exclusively, but largely an American issue. And it is largely four or five very big American companies.

Katie Martin (3:54)

The case is about Apple, but it's not just Apple, right? Which are the big US companies we talk about here?

David McWilliams (3:59)

The really big ones that are paying a huge chunk of corporation tax are Meta, Google, Apple, Pfizer, and Intel.

Katie Martin (4:07)

Uh-huh. Some big names, though.

David McWilliams (4:10)

Yeah, some huge names, some huge names. But again, the risk is that your tax base is very narrow.

Katie Martin (4:15)

Yeah. So at the moment, Ireland's got this problem where it's getting 13 billion euros that it doesn't want. Is it going to get like 13 billion euros from all of these guys at some point, and just end up completely swamped with money?

David McWilliams (4:28)

Well, I mean, there are many Irish citizens who are thinking, oh, this will be interesting.