The mammoth Apple tax pot is losing money and on course to shrink by €70m a year because of investment losses, according to the State’s financial watchdog.
Ireland has placed the nearly €14.3bn fund into escrow while legal challenges against the European Commission’s 2016 Apple tax ruling proceed.
Under an agreement with Apple, Irish taxpayers will not have to cover any shortfall if EU courts decide to hand the money back to the tech giant.
But if Ireland ultimately is ordered to keep the money, no mechanism exists to reimburse the investment losses or the many millions in management and legal expenses.
Their joint appeal before the EU’s second-highest court was heard last month in Luxembourg. Whenever that verdict comes, analysts expect the losing side to appeal to the top Court of Justice of the European Union, a move likely to extend the final outcome by several years.
Should Ireland and Apple lose the argument, yesterday’s report from the Comptroller & Auditor General (C&AG) suggests the State could receive hundreds of millions less than had they accepted the order.
The C&AG said the National Treasury Management Agency (NTMA) and Apple jointly agreed in May 2018 to appoint the Bank of New York Mellon as escrow agent with the power to hold and release the funds.
The following month, they appointed three asset management firms – Amundi, Blackrock and Goldman Sachs – to invest those funds into “highly rated euro-denominated fixed income securities”. Their aim, it said, was “to preserve the capital value of the escrow fund to the greatest extent possible”.
From May to September 2018, Apple paid 12 payments into the escrow account totalling €14.285bn. By the end of the year, €14m already had been lost, leaving €14.271bn.
The report said the money had been invested overwhelmingly in minimum-risk bonds that currently generate investment losses, because of “the current negative interest rate environment”.
While the report didn’t break down the bond portfolio by nation or business, many government bonds issued by the eurozone’s most creditworthy members have fallen into “negative yield” territory.
Bonds bearing negative yields pay out less, when redeemed, than their original cost to acquire.
Currently the debt securities issued by 11 eurozone members including Ireland offer negative yields.
They continue to be acquired, in part, because many funds are mandated to invest in low-risk assets.
The report also documented high running costs associated with the fund’s design and maintenance, including €2m in 2018 expenses and another €3.9m in legal and consultancy fees incurred by the Department of Finance, Revenue, NTMA, Central Bank and Chief State Solicitor’s Office.
Source: Read Full Article