Apple Tax Windfall: How Will Irish Government Spend €14 Billion?

The Irish government has been told it needs to be done Collect €14bn (£11.8bn) in back taxes From Apple.

The European Union's highest court has ruled that a US tech company profited from an illegal sweetheart tax deal in the country.

But how will the Irish government use this windfall?

The most boring and conservative thing a government can do is reduce the country's national debt.

At the end of last year, Ireland's net public debt was around €181bn (£152.7bn).

So using the entire loss to repay the loan will reduce it by about 8%.

This will help the government reduce the amount of interest on the debt and give the country some breathing room if there is an economic downturn.

However, there is no great urgency to do so as the debt is not particularly high by international standards.

As a proportion of national income, net debt is about 60% compared to the UK where it is almost 100%.

There was a suggestion that EU rules would require the money to be used for debt reduction but Ireland's Finance Minister Jack Chambers said that was not the case.

Ireland's economy has recovered strongly from the banking crisis and austerity of the late 2000s.

But the country's infrastructure could not keep pace with that growth. Significant investment is required in energy, water and housing.

So could €14bn be used to kickstart a major program of public works?

Taoiseach (Irish Prime Minister) Simon Harris suggested it was on the agenda: “There are clear areas where it should be considered around infrastructure, housing and other areas where there are constraints.”

A potential drawback with this is the lack of construction workers.

Ireland is close to technological full employment so obviously there is not a reserve army of workers ready to dig ditches and lay blocks.

Attempting to spend heavily on construction in the short term can only increase inflation.

The Irish government has begun the process of establishing a €100bn (£84.4bn) sovereign wealth fund and a second €14bn (£11.8bn) pot to cushion infrastructure spending during the economic downturn.

These are being set up using some of the corporation tax windfall Ireland has received from large global companies in recent years.

From 2024 to 2035, an amount equivalent to 0.8% of GDP will be paid into the core fund each year.

Depending on investment returns, the fund could reach €100bn (£84.4bn) by 2035.

The government can then reduce the investment income of the fund without reducing the principal capital.

Keeping the money in the fund could help reach the €100bn (£84.4bn) target by 2035.