Last week, after Europe’s highest court ruled that Ireland had granted €13 billion in “illegal” tax breaks to Apple, I argued that Ireland had played its hand wonderfully. 

I have long been critical of the decision to grant two sweetheart deals to the multinational, particularly the decision to roll over the deal in 2007. That latter decision smacked of entrenched arrogance and a blinding indifference to the rule of law.

But, when the competition tzars in Brussels started to rightfully target Ireland, the response from Dublin was masterful. It remained steadfastly loyal to the multinational, denying all wrongdoing, and invoking every legal manoeuvre it could to prevent Apple from writing a cheque. Meanwhile, it sought to rehabilitate its international reputation by reforming the corporate tax system here, while simultaneously helping to rewrite the international tax code by cosying up to the OECD.

When the dust settled, the new tax rules created a new river of corporation tax gold for Ireland, and Ireland’s relationship with multinationals was copperfastened. Now, we even have the bonus €13 billion (swollen to €14 billion due to interest).

It was a high-risk strategy. A decade ago, as a cash-strapped Ireland emerged from the ignominy of an international rescue package, it would have been easy to forsake Apple and accept the €13 billion. 

We were broke, after all. And the optics of a government spending millions to prevent the receipt of billions was politically dreadful.

But instead, Ireland played the long game. It took a strategic decision to think long-term, to galvanise the economic model for the future. 

Now, as Ireland grapples with what to do with the Apple bounty, we again need to play the long game. Once again, we need to make a strategic decision to think long-term. Once again, we need to galvanise the economic model for the future.

Put bluntly, we need to depoliticise this money as quickly as we can.

The needs of the short term, whatever they are, are outweighed by the needs of the long term. Whatever decision is made with this money requires long-term, strategic, thinking.

Energy, ports and wealth funds

In a sense, the money has come at a bad time. The budget is imminent, and an election will soon follow. 

The level of public and political expectation is already high, and the Apple cash will add further fuel to those expectations. 

Already, politicians are getting giddy about how it could be spent. Simon Harris has described the unexpected windfall as “exciting”, signalling some could be used for housing. Sinn Féin’s Mary Lou McDonald said her party would spend the money on housing and infrastructure.

Harris and McDonald, of course, know that, of all the reasons for preventing Ireland from building houses, money is well down the list.

Ireland does not have a money problem; if anything, at present, the issue is we have too much money. Instead, we have a capacity issue; we are constrained in how we can effectively deploy capital. As the Fiscal Council reminds us, extra money in a supply-constrained economy is a bad thing, it only leads to higher prices.

The last thing the Irish economy needs right now is another €14 billion. Even before this latest Apple windfall (it was only last week that the multinational thoughtfully chipped in with a few extra billion in scheduled corporation tax receipts), the Fiscal Advisory Council and the governor of the Central Bank were warning the government not to break its spending rules in Budget 2025 (the government decided otherwise).

So, if we are to take politics out of the deployment of the money, how should it be used? In a word: boringly.

One option being touted among high-ranking civil servants is infrastructure. Not roads or railways, though. Instead, there is a view that the money could be routed through the Irish Strategic Investment Fund (Isif), an offshoot of the NTMA,  and used to upgrade critical energy infrastructure along with the capacity of our state-owned ports.

The national grid is creaking. It is a point continually made by multinationals who invest here. The situation will only get worse. Eirgrid could be funded to upgrade the electricity network. So too Gas Networks Ireland, which owns and operates the gas network. Again, the network could do with a significant injection of finance. Our ports, critical access and egress points for goods and the deployment of offshore wind farms, have long been in need of development.

Critics will point to state aid issues. In all likelihood, these concerns could be overcome given that Eirgrid and Gas Network Irlenad are state-owned monopolies, while deals could be carved out with the few privately owned ports. 

It might not be a sexy or politically popular allocation of last week’s lottery win, but it could copperfasten crucial infrastructure at a time when Ireland needs it most.

Another option, one favoured by a number of serious minds and one that carries some hefty merit, is to hedge Irleand’s exposure to Ireland through a sovereign wealth fund. 

There are several avenues to make this happen. The first would be to channel the Apple stash into a standalone fund, hire the best international fund managers, and ask them to seek out the best financial returns. 

Like in the case of Norway, the exemplar in sovereign wealth funds, it would have an explicit investment mandate and be governed by a specific set of investment objectives and fiscal rules on deposits and transfers.

It should be encouraged to invest internationally as opposed to domestically. This ensures that the fund is depoliticised from local issues, and also hedges Ireland from a downturn in the domestic economy. 

If it is to invest here, it should be because it offers better returns as opposed to supporting domestic industry – we have other funds and money for that purpose, such as Isif. 

As Peter has written before, the best sovereign wealth funds have embedded risk diversification into the strategy. In Norway, 27 per cent of the uber-successful fund is invested in fixed-income securities, while 70 per cent is in equities. Just 2 per cent is in real estate. It has taken big positions on Apple, Alphabet, Microsoft, Nvidia and Amazon.

Stephen Kinsella, The Currency‘s former columnist recently appointed chief economic advisor to the Taoiseach, has argued before that a true sovereign wealth fund should have a time horizon of at least 50 years. “Many funds started simply investing in bonds. Then they learned about investing in equities, and then simply public ones. Then private equity, seed investing, and so on. The overarching concept should be a perpetual balance sheet,” he told an Oireachtas committee on the matter last year.

The real constraint is talent. Sovereign wealth fund management has the same talent dynamics as professional soccer or basketball, in that the returns to a superstar are ten times the returns to a mere star. The superstars are, by their very definition, rare. Finding them, and getting the huge pay packets they would command past the many political and administrative hurdles designed to cap such pay would be very difficult, but not impossible.

If the government opts not to launch a standalone wealth fund for the Apple money, it could allocate the money to the new Future Ireland Fund, which, when operational, will fall under the remit of the NTMA. 

Even without the Apple billions, the ambition of this fund is significant. For each year from 2024 to 2035, the government has committed to investing 0.8 per cent of GDP will in it. 

It is being bolstered by €4.1 billion from the dissolution of the National Reserve Fund in 2024. Taking account of annual contributions, growth in GDP and potential return from investments, the fund has the capacity to grow to €100 billion by 2035, according to government estimates.

Details of its investment mandate or the people who will run it on a day-to-day basis are not yet known. Jack Chambers, the finance minister, brought an initial memo on saving funds including the Future Ireland Fund to cabinet last week. “An interim investment strategy has been agreed for the funds pending the completion of a longer-term investment strategy. The NTMA which manages the funds will be formally publishing the interim investment strategy in the next number of weeks,” a spokesman for the Department of Finance said. 

It is understood that the fund will initially focus on bonds in its interim strategy before a longer-term approach is decided. The €14 billion could be used to accelerate its progress. 

Unlike the seemingly neverending corporate tax windfalls, this money is genuinely a windfall. It is a once-off payment. 

We need to avoid using it for political purposes. Instead, we need to use it to safeguard our financial future. That would be quite the legacy of the Apple tax dispute.

Elsewhere last week…

Entrepreneur Mairead Mackle oversees a host of different businesses, from healthcare to housing, and from renewable energy to beef production. But as she told me last week, they are unified by her desire to have a positive social impact.

Under his watch, Ifac has increased revenues from €15 million to almost €40 million through growth and acquisition. Now John Donoghue plans to make the farmer-owned accountancy co-op a dominant player in the SME market. He told me how.

More than a decade after they pumped money into an offshore property fund, a string of well-heeled investors were hit with tax bills. Last week, we revealed the story of the tax authority’s battle over the liquidation of the multi-million euro fund.

Ronan Lyons is an international expert on housing policy. Last week, he argued that Sinn Féin’s policy document marks a continuation of current housing policy, rather than a radical shift.