'You were encouraging tax avoidance and you knew it': Nobel economist weighs in on Apple case

NOBEL PRIZE-WINNING economist Joseph Stiglitz has criticised the Irish government’s plan to appeal the European Commission’s decision that Apple owes Ireland €13 billion in back tax.

Stiglitz, who was on Today with Sean O’Rourke this morning to promote a new book, said that the government’s decision to appeal was “wrong”.

In a statement yesterday, Minister for Finance Michael Noonan said the government planned to appeal the commission’s ruling on the grounds it never gave Apple favourable treatment – and all tax owed was paid in full.

However, Stiglitz disagreed with the government’s position – adding that Ireland had been complicit in Apple’s tax-dodging setup.

“What the minister was saying was all utter balderdash. The fact is that you were encouraging tax avoidance and you knew it. Let’s not make any pretence about it.”

Tax haven

Yesterday, the European Commission found that Apple had participated in tax avoidance on a massive scale between 2003 and 2014.

All profits made by the company on its European, Middle Eastern, African and Indian sales were effectively being routed to Cork, from where they siphoned off to another Apple subsidiary that paid no tax on the vast majority of the sums.

Apple’s effective tax rate on European profits in 2014 was 0.005%, the commission said.

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Stiglitz said that Ireland’s tax policies to attract foreign direct investment had been short-sighted.

“You got a few jobs at the cost of stealing revenues away from countries around the world and that’s the kind of activity that has to be stopped,” he said.

Another noted economist, Paul Krugman, who famously referred to Ireland’s 26% GDP growth figure as “leprechaun economics”, told Business Insider the only way to stop tax avoidance was for ”all the major economic powers say ‘this is a no-no’ – then it’s going to be very hard for them to run away from it”.

The €13 billion question

Minister for Public Expenditure Paschal Donohoe said that the government is worried that if the companies that settled here can’t rely on our tax regime, they will relocate.

“The Irish national interest is so clear here. The companies we’re referring to … corporation tax alone each year for Ireland is worth €7 billion.”

“That’s corporation tax alone, not to mention income tax, PRSI, all the other forms of taxation that are generated by the jobs here in our country.”

But Stiglitz said: “The argument that you’re going to lose a lot of jobs is absolute nonsense.

“I think Ireland can provide a lot. It has a well-trained labour force, a disciplined labour force and that’s the basis on which countries should compete. So this idea that all these people will leave and that jobs will disappear is a vote of lack of confidence in Ireland.

Stiglitz said he found it “absolutely mystifying” that the government didn’t want to take the €13 billion to help the Irish people.

Written by Elizabeth O’Malley and posted on TheJournal.ie