The strange nature of living in a tax haven, where 26 percent GDP growth is accompanied by austerity and a homelessness crisis.
- By Jennifer DugganJennifer Duggan is a Dublin-based journalist; she has written for Politico and the Irish Times.
Apple’s European headquarters sit in an industrial park just outside the southern city of Cork. The sprawling campus of brick and glass seems real enough. So do the people who work there: Apple is a major employer in the area, with 6,000 employees. From here, Apple almost seems like a normal, if very large, company — not the sprawling, tax-evading corporation of subsidiaries, holding companies, and affiliates we’ve heard about this week.
Apple is just one of many multinationals based in Ireland — a result of the country’s deliberately low corporate tax rate, a propensity for making special tax arrangements with the right businesses, and an English-speaking, well-educated workforce. These companies have brought with them very real benefits: Apple, in addition to the people it employs directly, has helped attract other multinational tech giants since it first set itself up there in the 1980s; Facebook and Google both have large offices in Ireland. In total, foreign multinationals now employ one out of every five Irish workers.
But these companies have also created a sort of strange duality in the Irish economy, as outspoken former Greek Finance Minister Yanis Varoufakis put it in an interview in March. “There’s the Apple/Facebook Ireland, and then there’s the Ireland of everyone else,” he said. “Those who lost young people to emigration, who are not coming back because their jobs are not there.”
The last time the strangeness of this dual Ireland was thrown into relief was in July, when the country’s GDP growth numbers were adjusted, and we learned that Ireland had grown a remarkable 26.3 percent in 2015. The number was staggering: Less than a decade after 2008, when Ireland became the first eurozone country to enter a recession, the Celtic Tiger was seemingly bounding back, with nearly four times the GDP growth recorded in China for the same period. This summer we learned that, on paper at least, the Irish are living in boom times.
But if these are boom times, why does it still feel like so little has changed? The austerity measures imposed after the bailout of the country’s banks in 2010 are still in place; the country’s national debt stands at over $200 billion. According to polls carried out ahead of Ireland’s last general election, held in February, 50 percent of the population said it wasn’t feeling any recovery at all. Voters were, in fact, so unimpressed that they ousted the Fine Gael-Labour Party coalition, though they weren’t exactly inspired by the opposition Fianna Fail either: Fine Gael now governs in an unstable minority coalition.
The 26 percent growth figure was, of course, misleading, the result of what economists like Paul Krugman have dubbed “leprechaun economics.” It came about as a result of multinationals like Apple engaging in corporate restructuring to take advantage of low Irish tax rates: transferring into the country things like intellectual property, patents, and other assets that have little impact on the real-world economy but nonetheless showed up in the country’s GDP figures. The unlikely figure was played down by many politicians at the time, who worried that it was a bit unseemly for a country fighting against its reputation as a tax haven and with large amounts of debt to pay down. Ireland’s prime minister, Enda Kenny, has said the Celtic Tiger’s real growth figure is probably closer to 4 percent — not quite a whimper but not exactly a 26.3 percent roar either.
Four percent growth is nothing to sneeze at in Europe these days, and there are some signs that this on-paper recovery has made it to the real world. In Dublin’s city center, for instance, bars and restaurants are once again heaving. The party atmosphere is back. But in the shadow of those venues and on street corners is evidence of those who’ve been left behind. Ireland is facing a homelessness crisis on a scale never seen before since the foundation of the state. The numbers of people sleeping rough have risen dramatically; one of Ireland’s leading homelessness charities said this week that the problem is “now out of control.” Families unable to pay soaring rent prices have been forced into emergency accommodation, and waiting lists for social housing have been growing longer and longer.
Outside the main cities, signs of recovery are even fewer and farther between. Small towns around the country are pockmarked with shuttered small businesses. In one such town, Longford, located in Ireland’s midlands, population 10,000, the construction industry was one of the main employers; when Ireland’s housing bubble burst in 2008, the construction industry was hit especially hard. Those businesses that are still open are struggling. One resident who owns a small shop described his city to me as a “ghost town.” Longford’s young people have fled to Dublin and abroad in search of work. A large shopping center built just before the recession remains empty, unable to attract tenants.
Across the country, public services remain crippled by cuts in public spending as a result of the recession. Health care is underfunded, with long waiting lists and a shortage of hospital beds. “Schools are overcrowded,” said Siobhán O’Donoghue, the founding director at Uplift, a nonprofit campaigning on social justice, quality, and sustainability issues. She mentioned her local school, where two classes have begun sharing a single room.
In the wake of the 2010 IMF/EU bailout, Irish citizens suffered through years of austerity measures — punishing tax increases and cuts in public spending — while multinational corporations enjoyed low taxes. For the most part, this was endured without complaint: The Irish public protested over the introduction of water charges but has remained relatively quiet on the question of minuscule corporate taxes, seemingly accepting them as a necessary trade-off for clambering out of recession.
The European Commission ruled this week that Apple — the most prominent multinational to make its home in Ireland — must repay the Irish state 13 billion euros in back taxes, deeming Dublin’s deal with the megacompany “illegal state aid.” On Friday, the Irish government officially agreed to appeal the commission’s ruling on Apple’s back tax. The optics, as they say, of such a move are not good: The Irish government is effectively turning down a tax windfall. The European Commission has said Ireland doesn’t have to use Apple’s back tax to service its debt; 19 billion euros (what Ireland would receive, as Apple is also supposed to include interest in its payments) would make a substantial contribution to the country. It would cover the entire cost of running the beleaguered health system, for instance, for a year and a half.
Almost 11,000 people have already signed a petition organized by Uplift calling on the minister of finance not to appeal the tax ruling. They want “our government to stand up for the people of Ireland and not side with one of the wealthiest corporations in the world,” O’Donoghue said.
Ironically, the Apple issue may be coming to a head just as Ireland is beginning to shift away from the development strategy that has brought about all this furor. In the 1980s and early 1990s, Ireland had to rely on low corporate taxes and special tax arrangements to attract multinational firms. Back then, the country was a poor peripheral European state. In the years since, however, Ireland has come a long way — due in part to the multinationals. It’s home to a well-educated, skilled workforce and has developed a reputation as a global hub for technology, finance, and manufacturing. Many of the tax loopholes once available, including the dubiously named “double Irish,” have been closed off. Ireland today, while still in recovery from recession, is a lot more than just an address for companies to avoid paying their taxes. And so maybe the European Commission’s decision will simply spur a transition that is somewhat overdue.
It’s not clear that, even then, we’ll begin to feel the two Irelands — the Ireland of shiny multinational tech companies and the one of recession-battered small towns — have reconciled. But at least everyone will be paying their taxes.
Photo credit: Aidan Crawley/Bloomberg via Getty Images
Correction, Sept. 7, 2016: The town of Longford has a population of roughly 10,000. A previous version of this article said the town’s population was 40,000, which is instead the number for Longford County.