Ireland Apple Escrow Fund loses €36m as negative rates bite

Company also withdrew €209m from the fund to pay tax in another jurisdiction

The State set up the escrow account in 2018 to hold €14.3 billion of alleged back-taxes and interest that the European Commission ordered it to collect from Apple.

The State set up the escrow account in 2018 to hold €14.3 billion of alleged back-taxes and interest that the European Commission ordered it to collect from Apple.

 

The value of the Ireland Apple Escrow Fund fell by €36 million to €13.98 billion last year as the portfolio took another hit from negative interest rates applying to its investments in highly rated euro zone government bonds, according to the Department of Finance.

A pervasive negative rates environment, a result of European Central Bank monetary policy, where bond investors pay borrowers for the luxury of taking their money, wiped €40 million off the value of the fund in 2019.

That year also saw Apple withdraw €209 million from the fund to pay tax in another jurisdiction.

The State set up the escrow account in 2018 to hold €14.3 billion of alleged back-taxes and interest that the European Commission ordered it to collect from Apple, even as the State and the iPhone maker appealed the matter before the courts in Luxembourg.

Last July, the EU’s General Court ruled that the commission “did not succeed in showing the requisite legal standard” that Apple’s arrangements in Ireland amounted to illegal benefits from the State.

However, the commission moved in September to appeal that decision to the European Court of Justice, the highest EU court, which may see the case drag on for another two years.

Funds in the escrow account, which are mainly held by way of bond investments rather than cash, will be released at the end of legal proceedings.

“The €36 million decline for the year primarily reflects the current negative interest rate environment and negative yields on highly rated euro-sovereign, quasi-sovereign bonds and fund operating expenses,” the Department of Finance said on Tuesday as it released the 2020 accounts for the escrow fund.

Fees

Three investment managers – Amundi Asset Management, Blackrock Investment Management (UK) Limited and Goldman Sachs Asset Management International – were appointed to provide investment management services to the fund in 2018. BNY Mellon was selected as escrow agent and custodian of the fund.

Investment managers’ fees amounted to €5 million, while BNY Mellon fees came to €1 million last year.