Leprechaun economics
[28] In 2018, the OECD showed that Ireland's public debt metrics differ dramatically depending on whether Debt-to-GDP, Debt-to-GNI* or Debt-per-Capita is used;[29][30][31] and in 2019, the IMF estimated 60 per cent of Irish foreign direct investment was "phantom".
[5] Twenty four minutes later, at 11.24am GMT, Nobel Prize-winning economist Paul Krugman responded to the data release by posting: Leprechaun economics: Ireland reports 26 percent growth!
[6][7][8][9][36][1][2] Leprechaun economics became a label for the Irish 2015 GDP 26.3% growth rate, and has been as such by a diverse range of sources.
The office also stated that: "As a consequence of the overall scale of these additions, elements of the results that would previously been published are now suppressed to protect the confidentiality of the contributing companies, in accordance with the Statistics Act 1993.
[59][60] On 13 July 2016, the ex-Governor of the Central Bank of Ireland made the following comment: The statistical distortions created by the impact on the Irish National Accounts of the global assets and activities of a handful of large multinational corporations have now become so large as to make a mockery of conventional uses of Irish GDP.The delay by the Central Statistics Office in publishing revisions to Q1 2015 data (the period in which the growth appeared), as well as the redaction of regular data from 2016 to 2017, meant that it would take almost three years for economists to show § Proof of Apple (2018) in Q1 2018.
In September 2016, the Central Statistics Office again denied this claim and repeated its assertion that the growth was from a range of sources including aircraft leasing.
[63] By early 2017, research in the Sloan School of Management in the Massachusetts Institute of Technology, using the limited data released by the Irish Central Statistics Office, concluded: While corporate inversions and aircraft leasing firms were credited for increasing Irish [2015] GDP, the impact may have been exaggerated.
[65] The Central Statistics Office (Ireland) did not list Modified GNI (discussed later) in their Key Summary Economic Indicitors for September 2018, but only GDP, GNP and Debt-to-GDP.
There were unsubstantiated claims by the Irish government that the effective impact of the increase in the GDP levy would be reduced to circa €280 million per annum.
[70][71] On the 8 November 2016, a report by the EU Director-General for Internal Policies ("DG IPOL") on Ireland's "leprechaun economics" affair, noted that Detailed explanations are not provided, due to confidentiality rules aimed at protecting companies, and that the International Monetary Fund had stated that Additional metrics better reflecting the underlying developments of the Irish economy should be developed.
[71] The report concluded that: It is becoming increasingly difficult to represent the complexity of economic activity in Ireland in a single headline indicator such as GDP.
And its debt level is at least a quarter higher than taxpayers have been led to believe"; and that "Embarrassed by what Paul Krugman, the economist, denounced as "leprechaun economics", Ireland's policymakers were determined to avoid a repeat".
Many of the dramatic shifts that occurred in Ireland's national accounts and balance of payments data were attributed to Apple but this was largely supposition – even if it was likely to be true.
Now we know it to be true.Coffey's January 2018 post also showed that Apple had restructured into the Irish Capital Allowances for Intangible Assets ("CAIA") BEPS tool.
[89][90] By April 2018, economists confirmed Coffey's analysis, and estimated Apple onshored USD 300 billion of IP from Jersey in Q1 2015 in the largest recorded BEPS action in history.
[15][3][91][13] In June 2018, the GUE-NGL EU Parliament group published an analysis of Apple's new Irish CAIA BEPS tool, they labeled the Green Jersey.
This was changed back in the subsequent 2017 budget by the new Finance Minister Paschal Donohoe, however firms which had started their Irish CAIA BEPS tool in 2015, like Apple, were allowed to stay at the 100 per cent relief level for the duration of their scheme,[101][102] which can, under certain conditions, be extended indefinitely.
[110] The report also showed that "intangible allowances", which are claimed under the CAIA BEPS tool, jumped by over 1,000 per cent, or €26.2 billion in 2015 (from €2.7 billion in 2014), which was consistent with the euro amount of profits that Apple's ASI was shifting through its hybrid–Double Irish BEPS tool at the time.
[112] In May 2019, The Times reported that IMF experts, including Erik De Vrijer, Director of the IMF's European department, expressed concern about the lack of official understanding about the driver in the dramatic rise in Irish corporation tax receipts since 2014, and the implications for long-term State spending.
[115][116] In October 2017, Seamus Coffey questioned whether "reverse leprechaun" taxes would have any effect on U.S. multinationals leaving Ireland: In 2015 there were a number of “balance-sheet relocations” with companies who had acquired IP while resident outside the country becoming Irish-resident.
It is possible that companies holding IP for which capital allowances are currently being claimed could become non-resident and remove themselves from the charge to tax in Ireland.
Since leprechaun economics, research groups and commentators have highlighted that many Irish statistics are materially distorted by "leprechaun economics" type effects:[118] By April 2018, economists noted EU-28 aggregate GDP was being distorted by Irish BEPS tools, and the Apple iPhone sales cycle.
[51] By January 2020, economists had begun to realise that the Netherlands, as well as Ireland was also distorting EU-28 statistics, with the US Council of Foreign Relations, in a note titled: "Leprechaun Adjusted Euro Area GDP", said: "The entire euro area's economic statistics now need to be adjusted to remove the distortions created by the tax transactions of large multinationals operating in Ireland and the Netherlands".
