Friday, September 9, 2016

Apple, Brexit, and Catastrophe. The ABCs that Could Topple Ireland's Skyrocketing Economy

So. You're thinking of moving to Ireland and you think to yourself: "I'd better get a job!" And why not! Everyone else seems to be doing it. The economy here is in strong recovery. Unemployment has fallen from a high approaching 20 percent of the working population in 2010 to only 8% as I write. The economy is stampeding forward. The number-crunching lads figured out that in 2015 Ireland's Gross Domestic Product (GDP) grew at an astonishing 26%. I'll repeat that.


So what could possibly go wrong? Well, a couple of things actually. And if you're looking to get a job here I'd suggest you look quick because Ireland's post-Great Recession, post-Celtic Tiger economic miracle could unravel. Fast. If it does it's going to sound like a drunk hitting the floor with a resounding Splat. And we're all going to get caught in the messy aftermath.

The Brexit Doomsayers

If you haven't heard of Brexit you've possibly been stuck in a pub for too long. A few weeks back many of the citizens of Great Britain voted to leave the European Union. So what? you may ask. If you're living in Ireland it's a very big deal, that's what.

Ireland exports over a billion quid's worth of goods to Great Britain every year. It is one of the country's most important and valuable trading partners. Exports to the UK keep thousands of Irish workers in jobs. When Britain finally leaves the EU it's quite possible that trade barriers will be erected. Import restrictions could well become the order of the day. And that spells trouble. 

The value of sterling has already plunged on International monetary markets, making exports from Ireland to GB over 10 percent more expensive. Due to currency exchange rates alone, the demand for Irish goods and services is falling if not like a brick, then with enough velocity to get worried. Local news is full of reports of Irish businesses being forced to curtail contracts with the UK because profit margins are being squeezed to the breaking point. And what's of real concern is: the UK has not yet exited from the EU. That will occur well down the road, possibly in late 2017 or 2018. But the vote to Leave was enough and has already hit the Irish economy and its workers. Hard.

The worst case scenario is hard to accept. Should the UK go into recession as some are forecasting, that situation - together with the already mentioned dismal currency exchange rates - will shrink UK consumer demand. That will put a downward squeeze on the demand for Irish goods and services. If demand falls Irish employers will have no choice but to sack their workforce. And I worry it could be in droves.

But if Brexit isn't enough of a challenge let's look at the Apple fiasco.

Making Apple Sauce of Ireland's Tax System

Apple, that nice little iPhone maker and world's most valuable company, has for years been minimising taxes using a number of off-shore mechanisms. Ireland has been key to that strategy. Very recently, EU mandarins accused Apple of benefiting from Irish tax legislation that it deemed uniquely beneficial - and therefore illegal. It is demanding Apple pay over €13 billion to the Irish Exchequer in unpaid corporate profits tax. And that doesn't include penalties and interest which it has yet to apply. 

On the face of it this doesn't look like a bad thing, at least not for the burdened Irish taxpayer. After all, 13 billion euro can build a good few hospitals or fill the gigantic potholes in Ireland's creaking road system. However, the Irish government finds itself in a quandary.

If it accepts the EU's decision it means that it accepts the opinion that Ireland's tax treatment of Apple was illegal. If it does that it may have to admit that its entire tax policies are illegal which means that it may have to impose new rules on all companies operating here - including huge employers like Google, EMC, IBM, and so many others. And if it does that? Those companies could leave in droves as they look for greener, more tax-friendly, homes.

So what is the government doing? They are planning to appeal the EU ruling. In other words, they don't want to take 13 billion euro off Apple's hands. Of course, Irish citizens are going somewhat nuts. "Refuse 13 billion? Are you mad?" some yell. So no matter what the government does they're in trouble. If they accept the ruling and accept the money, they could possibly drive away large employers. If they win the appeal, they're going to piss-off the big chiefs who manage the European Union, which could have lasting implications. In this case the only real winner will be Apple and its shareholders, who will be able to continue to shelter that wee stash of cash.

But the Apple conundrum also stirs uncertainty in the Irish business community - and business managers hate uncertainty. If Apple isn't stewed carefully the situation could turn into something much more than Apple-sauce. It could mean a reduction in jobs across the board as Ireland's companies reconsider their options.

Apple and Brexit illustrate the complexities and risks inherent in an open economy like Ireland. While the jury is still out regarding how these enormous issues will affect longer term economic stability in this country, one lesson becomes clear:

If you're looking for a job in Ireland, do it quick. 

(P.S.  You know that 26% growth I mentioned? Well maybe not. It turns out much of that growth is possibly attributed to Apple's migration of billions in European operating profits to Ireland for beneficial tax treatment. So that 26% number is inflated with moneys that don't really contribute to Ireland's economy or her people at all. Sigh...)

A Survivor's Guide to Living in Ireland 2015 / 2016 Kindle Edition Now Available!
If this blog interests you, then you might want to know more about living and working in Ireland. Are you thinking of traveling to Irelandmoving to Irelandworking in Ireland? Do you want to understand what makes the Irish tick, how you can get a job here, and how to survive in this wonderful country? If so, consider purchasing the 2015 Kindle edition of A Survivor's Guide to Living in Ireland. Over 11,000 have already done so! Now over 85,000 words long, this book could make the perfect gift for those interested in this wonderful country. Simply click on any of the above links to purchase the new 2015 Kindle edition. You can also download free apps to read the Kindle version on any PC or Mac. 

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