London: The European Commission's ruling that Apple Inc should pay up to 13 billion euros of back-dated taxes could help Ireland reduce its debt significantly but may undermine its government, Standard & Poor's told Reuters on Wednesday.
"There are many uncertainties ahead but if we assume that the money will definitely come through, the sum of 13 billion euros is not insignificant for an economy the size of Ireland," said Moritz Kraemer, the ratings agency's chief European sovereign rating officer.
That figure constitutes more than five per cent of Ireland's gross domestic product, and would allow the country to bring its debt down to about the mid-80s per cent of gross domestic product if the government uses it for that purpose alone, he said.
Ireland's debt-to-GDP ratio is around 94 per cent, according to Thomson Reuters data.
The European Commission ordered Apple to pay Ireland unpaid taxes of up to 13 billion euros ($14.5 billion) on Tuesday as it ruled the firm had received illegal state aid.
Apple and Dublin said the US company's tax treatment was in line with Irish and European Union law and they would appeal the ruling, which is part of a drive against what the EU says are sweetheart tax deals that usually smaller states in the bloc offer multinational companies to lure jobs and investment.
Policy warning
Mr Kraemer warned that the ruling might destabilise the current government and its ability to formulate and implement policy - an important rating factor that Standard & Poor's looks at.
"If the government chooses not to accept the 13 billion euros at a time when they have stated the money is not there for other spending needs, it could undermine them in the eyes of the public and weaken their position," he said.
Mr Kraemer added that it may be that the Irish business model is being put to the legal test.
"It is clear that if (Finance Minister) Michael Noonan does not want to take the money, then it means he believes it undermines the success of Ireland's economy since the crisis."
"So it might be that the Irish business model is being put to the legal test, and this may not be the end of it - it may turn out to only be the first example of its nature, we don't yet know."
Ireland is rated A+ by S&P with a stable outlook. Mr Kraemer said that a 13 billion euro windfall on its own would probably not make the agency change the rating.
S&P has upgraded Ireland three times since 2014 from an all-time low of BBB+ hit on the back of a banking crisis that saw Ireland take an international bailout to avoid bankruptcy.
Ireland also has an investment grade rating with Moody's, Fitch and DBRS.
DBRS is due to report on Ireland this Friday, while S&P is scheduled to review Ireland in December.
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