Apple upgrades Ireland’s credit rating outlook

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Being a world class hub for corporate tax . . . cough, optimisation has been a good gig for Ireland. But it turns out that being forced to accept €13bn in back taxes from Apple can also be a nice thing.

From S&P Global just now, with FTAV’s emphasis below:

Republic Of Ireland Outlook Revised To Positive On Extraordinary Fiscal Overperformance; ‘AA/A-1+’ Ratings Affirmed

• Overperformance in corporate tax receipt collections is driving record fiscal surpluses in Ireland.

• A handful of foreign-owned firms are contributing a disproportionate share to the government’s recent bumper revenue growth, including a one-off collection of back taxes from Apple Inc.

• We expect the government will use proceeds to rebuild fiscal buffers rather than increase current expenditure, supporting the resilience of Ireland’s small open economy.

• We therefore revised our outlook on Ireland to positive from stable and affirmed the ‘AA/A-1+’ long- and short-term ratings.

OK, OK, it’s not all just about the Apple windfall that the European Union Court of Justice is cruelly imposing on a reluctant Dublin.

Even without the €14.1bn about the enter the country’s state coffers, regular corporate tax receipts will still hit about 2.8 per cent of national income — the highest in the eurozone, S&P notes. But Apple’s money will turn a juicy fiscal surplus into a bonanza.

As S&P noted:

The one-off collection from Apple will add yet another boost to exchequer coffers. The EUCJ has upheld a European Commission ruling from 2016 arguing Apple enjoyed preferential tax treatment over 1991-2007 which were akin to illegal state aid. Ireland is no longer running the specific tax arrangement in question but fought the case alongside Apple. Following a set of appeals a final judgement was made in September 2024 that confirmed the Irish government must collect the €14.1 billion in back-taxes and accrued interest held in escrow. We understand the likely accounting treatment will be an immediately recognized increase in general government revenue for 2024, which is the principal driver behind our significantly upwardly revised fiscal surplus for the year.

The positive outlook means that S&P thinks that there’s a good chance that Ireland will soon receive a rare, pristine triple-A long term rating. Our readers who are eurozone crisis vets will notice that is quite the turnaround.

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Publish date : 2024-11-15 13:43:00

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