Ireland dumps Apple’s back taxes into low-risk bonds amid appeal

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James-Bond-money
That would be a high-risk Bond.
Photo: Sony Pictures/Cult of Mac

Ireland has invested Apple’s back taxes into low-risk, highly rated bonds, according to a new report. The move is an effort to preserve capital amid an ongoing appeal, which could take several years to resolve.

The back taxes of around $15 billion were collected after the European Commission ruled in August 2016 that Apple had received unfair tax incentives from the Irish government in breach of EU rules.

Both Apple and Ireland are appealing the decision and have argued that Apple’s tax deals were in line with Irish and EU laws. But Apple was forced to cough up anyway until a decision on its appeal has been made.

Ireland wants to keep Apple’s money safe

If Apple is lucky, that $15 billion could be returned — but it could take several years for its appeal to be resolved. Ireland wants to keep the cash safe until it knows for certain what will happen to it, so it has chosen to invest it.

“Ireland’s debt agency has invested disputed taxes collected from Apple in low risk, highly rated euro-dominated fixed income securities, mainly short to medium-term sovereign and quasi-sovereign bonds,” reports Reuters.

Ireland’s National Treasury Management Agency (NTMA) explained in an annual report that the move was an effort to preserve capital as effectively as possible.

Apple agrees to swallow any losses

NTMA chief executive Conor O’Kelly is aware that the value of the fund is likely to fall. Based on current market conditions, it is likely to be worth $70 million less per annum. But the NTMA insists Irish taxpayers are protected.

That’s because Ireland has agreed with Apple that the iPhone-maker will swallow any losses itself.

“Apple and Ireland have agreed that the pot is the pot, whatever is there at the end so we don’t have to make up any difference,” explained O’Kelly. “That’s an agreed investment policy.”

Big money for Ireland

The $15 billion Apple has paid to Ireland, which includes interest, is the entire outstanding balance of the disputed taxes. It represents a relatively small chunk of Apple’s cash — but it could be huge for Ireland.

If Apple loses its appeal and Ireland must accept the back taxes, it’s enough to fund the country’s entire health service for a year.