Ireland had the highest rate of economic growth in the EU in 2015. Strong exports, increasing employment and a highly attractive foreign direct investment (FDI) offering have helped the Irish economy stage a strong recovery writes Shaun Murphy, Managing Partner of KPMG Ireland.
The economic shocks experienced by Ireland following the 2007 crash were severe. A credit squeeze, increased personal taxation and reduced exchequer spending created significant economic and business challenges. Faced with a rebuilding of its economy and international reputation, the Irish government and other stakeholders successfully set about the task of restoring our credibility. In 2016, Ireland is expected to record the strongest GDP rate of growth in the EU and an unbroken pattern of inward investment has helped Ireland reaffirm its record of long term growth and stability.
Notwithstanding a number of challenging years, Ireland’s record of delivery as a first class destination for international investment was rarely if ever called into question–proof if it were needed of the underlying strengths of Ireland as a location of choice for foreign direct investment (FDI).
For government, the tasks involved in maintaining Ireland’s attraction for businesses of every type and size have been significant. Firstly, in the context of a pan-European debate about how best to get economies back on track, the Irish government successfully restored the country’s reputation with international creditors. The efforts of government and the effectiveness and reputation of the tax collection function of the Revenue Commissioners were fundamental–further reaffirming our national economic credentials.
Secondly, state agencies and IDA Ireland in particular continued to work to promote Ireland’s business appeal. The commercial focus of embassies and the leveraging of a well-connected diaspora have all played their part. The results have been impressive. IDA Ireland has reported a strong performance in 2015 with the creation of over 19 000 new jobs, the most ever recorded in the agency’s 67 year history. High performing sectors such as financial services, agribusinesses, pharma and technology, to name just a few, have reinforced Ireland’s position as an FDI hub.
This long-term attractiveness of Ireland as a secure and stable home for inward investment is evidenced by the facts. Over 1 200 companies from global giants to high-growth brands have chosen Ireland as their strategic European base. Intel recently marked its 25th anniversary in Ireland, with an accumulated investment in their Leixlip Campus near Dublin of US$12.5 billion. In 2015 Microsoft celebrated its 30th year in Ireland, while in 2014 Xilinx marked its 20th year here and Citi and Bristol Myers Squibb their 50th.
These stories of investment success speak for themselves and help promote a cycle of investment motivated and reassured by the Irish performance of these companies.
Total employment in FDI in Ireland now stands at almost 175 000 people, the highest level in the history of the IDA. In 2015 there were 213 investments, up from 197 in the previous year. According to the American Chamber of Commerce in Ireland, US companies have $204 billion in foreign direct investment in Ireland, representing 9% of all US investment in the EU and 4.5% worldwide.
Inevitably, the tax environment plays an important role in helping senior decision makers choose Ireland. We have a stable tax regime with an extensive tax treaty network. The main company taxation benefits of being headquartered here include a highly competitive 12.5% corporation tax rate for active trading businesses, an attractive research & development tax credit regime, and tax depreciation for capital expenditure on intellectual property (IP).
The start-up environment is also exceptionally dynamic. Forbes magazine recently listed Dublin as one of the top seven cities in the world for start-ups. Ireland has the youngest workforce in Europe with 40% of the population under 29 years old. Ireland’s education system ranks in the top ten in the world according to the IMD Competiveness Yearbook 2015, which also ranks Ireland first in the world for the availability of skills, openness to new ideas and flexibility and adaptability when faced with new challenges. Furthermore Ireland is undoubtedly an attractive destination for internationally mobile and skilled people. Quality of life indices regularly rank cities such as Dublin in the upper reaches of global league tables.
The Irish government has recognised the need for tax certainty to help maintain our inward investment track record. The 12.5% rate is established and is settled policy of all of Ireland’s major political parties, both in government and opposition. The level of social cohesion and political agreement about pro-business policies is striking. In an uncertain world, Ireland also shows an emphatic commitment to the EU, providing further reassurance to investors. In conclusion, there is no complacency about Ireland’s position as a location of choice for business and stakeholders remain focused on providing the most attractive mix of reasons to choose Ireland.
This article was originally published in ©OECD Observer No 305, Q1 2016 and is reproduced here with their kind permission.