Blog Article 11 Oct 2021
IDA Ireland CEO Op Ed on new corporate tax rate

First published in Sunday Independent on October 10th 2021- The stability, consistency and transparency of Ireland’s corporate tax rate and regime has been an important strength for Ireland in fostering a business environment that is attractive to foreign direct investment. Investing overseas is a risky endeavour with few certainties.

At a time when corporate tax rates changed more frequently in other jurisdictions, Ireland’s commitment to the 12.5% rate – as reiterated on consecutive budget days – provided investors with a rare piece of certainty.

The Government’s decision to increase Ireland’s corporate tax rate to 15% for the relatively small cohort of companies with global annual turnover in excess of €750 million clearly represents a significant change in Ireland’s tax offering to investors. Global circumstances and Ireland’s constructive participation in the multilateral process necessitated this change. While we will be moving to a 15% rate for those companies that meet the turnover threshold, crucially Ireland will once again be emphasising the stability and consistency of that rate moving forward. The 12.5% rate will continue to apply to the vast majority of businesses in Ireland.

In the days ahead, IDA Ireland will continue to engage with multinational companies on Ireland’s endorsement of the 15% global minimum and the wider set of international tax reforms agreed at the OECD. I am travelling to the United States this coming week to engage first-hand with existing and potential investors on this and other issues.  A full assessment of the potential effects of the changes on FDI at a global level and in Ireland will only be possible once we have sight of further details on how the reforms will be implemented.

Our initial conversations with investors indicate that the move to a 15% corporate tax rate will not impact upon their existing investments in Ireland. IDA client companies have welcomed Ireland’s active and open dialogue with the OECD process and the public consultation held by the Department of Finance. Ireland’s reasoned position was well flagged and ultimately Ireland’s agreement to the global minimum rate will not come as a surprise to investors.  As global tax talks gathered momentum, we continued to see a strong flow of FDI projects into Ireland. IDA recorded remarkably resilient results in 2020 at the height of the Covid-19 pandemic and in the first half of 2021 we saw performance return to near record pre-pandemic levels. The investment pipeline remains strong.

For the companies IDA works with – leaders in their fields from high tech manufacturing to knowledge intensive services – the factors that make them invest and reinvest in Ireland are multifaceted and often unique to the company in question. It is difficult to isolate corporate tax on its own as a factor behind Ireland’s attractiveness to FDI and its importance varies amongst our client base depending on their stage of development. Tax, whether the corporate tax rate or the level of personal income tax, matters. As does Ireland’s track record as a place to do business, the availability of skilled talent, the quality and resilience of infrastructure, cost competitiveness, public investment in education and innovation to name but a few. We have also seen over the last year the resilience and strength of the Irish state and the Irish people in a time of immense adversity.

The change to the corporate tax rate will not make Ireland uncompetitive in attracting FDI. Many of our main competitors currently have higher corporate tax rates than 15% and are not expected to lower them.  An Ireland with a stable corporate tax rate of 15%, within a global framework, will be well placed to succeed provided we ensure we have a business environment fit for the 21st century economy. Even had the corporate tax rate remained unchanged, it was clear that in an intensely competitive environment Ireland needed to safeguard our strengths and address our areas of vulnerability.
Ireland has attracted a far larger share of FDI than might be expected given the size of our population, providing countless opportunities for people in each region of the country. From an economically disadvantaged island on the periphery of Europe, FDI has transformed Ireland into a hub at the centre of the global value chains that underpin the modern global economy. Multinationals dominate Ireland’s exports, spend on R&D and business contribution to the Exchequer. Most importantly, over 257,000 people are directly employed in high value jobs by IDA client companies with that figure reaching over 463,000 when including indirect employment in FDI suppliers and business partners throughout the country.

In addition to their transformative impact on our economy and society, multinationals have demonstrated longevity in, and commitment to Ireland. FDI is deeply embedded in Ireland through sizeable investments in people and capital. A third of IDA’s existing client base have been in Ireland for 20 years or more. The decade ahead will bring many challenges and opportunities, particularly as the technological and green transitions accelerate. Multinationals can drive Ireland’s transition to a digitalised and decarbonised economy. The new international corporate tax environment is an additional component to an era already characterised by change. Ireland has in the past adapted ably to changed circumstances. If we retain our competitive edge across all parts of our FDI value proposition, I believe we will adapt and continue to thrive.

 
 
 

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