Leprechaun economics

Nobel Prize-winning American economist Paul Krugman, whose tweet on 12 July 2016 used the term, Leprechaun Economics.[1][2]
Leprechaun economics: Apple's Q1 2015 USD 300 billion tax inversion of its non–U.S. business, was the largest ever BEPS action, and double the blocked 2016 USD 160 billion Pfizer–Allergan inversion[3]
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Leprechaun economics (Irish: eacnamaíocht Leipreacháin) was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 GDP, later revised to 34.4 per cent,[a] in a 12 July 2016 publication by the Irish Central Statistics Office (CSO), restating 2015 Irish national accounts.[5][6][7][8] At that point, the distortion of Irish economic data by tax-driven accounting flows reached a climax.[1][2][9] In 2020, Krugman said the term was a feature of all tax havens.[10]

While the event that caused the artificial Irish GDP growth occurred in Q1 2015, the Irish CSO had to delay its GDP revision and redact the release of its regular economic data in 2016–2017 to protect the source's identity, as required by Irish law.[11] Only in Q1 2018 could economists confirm Apple as the source, [12][13][14] and that this was the largest ever base erosion and profit shifting (BEPS) action,[15] and the largest hybrid–tax inversion of a U.S. corporation.[3][16]

The event marked the replacement of Ireland's prohibited BEPS tool, the Double Irish, with the more powerful Capital Allowances for Intangible Assets (CAIA) tool.[13][14] Apple used the CAIA tool to restructure out of its hybrid–Double Irish tool, on which the EU Commission would levy a €13 billion fine in August 2016.[b][13][14] As a result of the action by Apple, a range of academics calculated that Ireland, already held by some to be a major tax haven, was the world's largest tax haven.[18][19][20][21]

The "Leprechaun economics" incident had follow-on effects. In September 2016, Ireland became the first of the major tax havens to be "blacklisted" by a G20 economy, Brazil.[22] In February 2017, Ireland replaced GDP with "Modified GNI (or GNI*)" (2017 Irish GDP was 162% of 2017 Irish GNI*, whereas EU–28 2017 GDP was 100% of GNI).[23][24] In December 2017, the U.S and the EU introduced countermeasures to the Irish BEPS tools.[25][26][27] In October 2018, Ireland introduced a reverse tax, to discourage IP from leaving Ireland.[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".[32][33][34]

  1. ^ a b Cite error: The named reference Reuters was invoked but never defined (see the help page).
  2. ^ a b Cite error: The named reference bbgquint was invoked but never defined (see the help page).
  3. ^ a b Cite error: The named reference cofr was invoked but never defined (see the help page).
  4. ^ "The World Bank Database: Real GDP Data". The World Bank. 2018. Archived from the original on 30 August 2018. Retrieved 30 August 2018.
  5. ^ Cite error: The named reference CSO1 was invoked but never defined (see the help page).
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  13. ^ a b c Cite error: The named reference patrick.smyth was invoked but never defined (see the help page).
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  24. ^ "Real GDP per capita". Eurostat. Archived from the original on 26 November 2018. Retrieved 26 November 2018.
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  34. ^ Cite error: The named reference IMF5 was invoked but never defined (see the help page).


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