IDA Ireland

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IDA Ireland
Formerly
Industrial Development Authority
autonomous non-commercial state sponsored body
Founded 1949
Headquarters Wilton Park House
Wilton Place
D02 YE35, Dublin, Ireland
Key people
Martin Shanahan, CEO
Frank Ryan, Chairman
Website www.idaireland.com

IDA Ireland is the agency responsible for the attraction and retention of inward foreign direct investment (FDI) into the Ireland. The agency was founded in 1949 as the Industrial Development Authority and placed on a statutory footing a year later. In 1969 it became a non-commercial autonomous state-sponsored body.[1] Today it is a semi-state body that plays an important role in Ireland’s relationship with foreign investors, with multinationals accounting for 10.2% of employment and 66% of Irish exports.[2][3] The agency partners with investors to help them to enter or expand their operations in the Irish market. It provides funding support to research and development projects, and has a number of direct support mechanisms, including employment and training grants.[4]

Successes[edit]

Throughout the 1950s, the IDA established its vision of 'industrialisation by invitation', a vision which initiated the low corporation-tax system that remains in place in Ireland today.[5] According to an article in a U.S. law journal in 1984, the IDA is 'probably the most powerful governmental agency in Ireland', as it 'acts as both coordinator and lobbyist for all matters relating to manufacturing and service industries as well as the industrial infrastructure'.[5] IDA Ireland has a large global network of branches/offices in the U.S., Europe, and Asia-Pacific.

While IDA Ireland gets its funding from the Irish State (with costs circa €48m in 2017), as an autonomous non-commercial state-sponsored body, it maintains its own independent board and governance. IDA Ireland is authorised to issue grants and financial incentives to firms coming to Ireland (paying out €91 million in 2017).[6]

The IDA has been successful in attracting multinationals to Ireland. As of 2018, foreign multinationals pay 80% of all Irish corporate taxes,[7] directly employing 25% of the Irish labour-force,[8] and are responsible for 57% of the non-farm economic value-add in Ireland (40% of value-add in Irish services and 80% of value-add in Irish manufacturing).[8][9] They comprise 14 of Ireland's top 20 firms (including tax inversions).

Criticisms[edit]

The IDA is strongly reliant on the U.S. as a source of FDI.[10] There are no non-U.S./non-U.K. firms in Ireland's top 50 firms (by revenue), and only one by employees, the German retailer Lidl. The 14 foreign multinationals in Ireland's top 20 firms are all U.S-based (including tax inversions). The U.K. firms in Ireland, outside of retailers like Tesco who sell into Ireland (also like Lidl), are pre-2009 after which the U.K. changed its tax code (see U.K. transformation).[11][12][13]

The IDA has listed managing Brexit as a priority in the coming years.[14] Ireland has been criticised for failing to win substantive London business, and particularly the valuable financial services business, as a result of Brexit.[15][16][17] However, the IDA has been credited with achieving limited success in the face of housing and infrastructure shortages and regulatory hurdles.[15] In the Irish government's 2019 budget, IDA Ireland was allocated €2 million for the purposes of Brexit preparedness and increasing Ireland's "global footprint".[18]

Up until 2018, the U.S. was one of the last few global jurisdictions not to run a "territorial" tax system (the U.K. switched in 2009-12). Jurisdictions with "territorial" tax systems have separate, and much lower, tax rates for foreign-sourced profits, and therefore make less use of Ireland as a base.[19][20] While the IDA market Ireland as a base from which to sell into Europe,[21] Ireland is mostly a base for U.S. multinationals to shield themselves from the pre-TCJA “worldwide” tax system. Ireland is considered by some to be one of the leading corporate havens in the world.[22]

U.S. multinationals aside, Ireland's main attractiveness is for life sciences manufacturing, who have an optimal combination of IP and tangible assets to use Ireland's main IP-based BEPS tool, the capital allowances for intangible assets scheme (which has an Irish effective tax rate of <3%).[citation needed] A key IDA Ireland target market is Japan, which is a large global source of life sciences manufacturing enterprises, and also has one of the highest corporate tax rates in the world.[23]

Challenges[edit]

Not only are U.S. multinationals the bulk of all foreign multinationals in Ireland, but they are also concentrated in a small group of very large technology and life science firms.[24][25][9] These firms have the "intellectual property" (or IP) needed to use Ireland's IP-based BEPS tax tools (which have effective Irish corporate tax rates of <3%). Ireland's largest company Apple, post their giant BEPS inversion in 2015 (see "leprechaun economics"), now represents circa 25% of Irish GDP. Because of Apple, the Central Bank of Ireland has had to replace Irish GDP with modified gross national income (or GNI*).

With the overhaul of the U.S. tax code under the Tax Cuts and Jobs Act of 2017, and a switch to a "territorial" system, it has been shown the net effective tax rates in the U.S. and Ireland are now almost identical, even with the replacement single malt system still in place (see effect of TCJA on Ireland).[26][27] There is a concern whether IDA Ireland can still be successful in such an environment, both in terms of keeping existing U.S. multinationals and attracting more.[28] This is amplified by Ireland's poor competitiveness in most non-taxation related aspects (see Global Competitiveness Report).[29][30][31][32]

In 2015 the Irish government announced a five-year plan for the IDA aimed at accelerating economic recovery in the country, setting a target of 80,000 jobs by 2019 and investing €150 million in a regional property programme.[33] This jobs target was reached in 2017.[34] In its 2019 budget the Irish government allocated an additional €10 million to the property programme to promote regional development.[18]

See also[edit]

References[edit]

  1. ^ "Entities audited by the Comptroller and Auditor General". Comptroller and Auditor General. 2008.
  2. ^ "Foreign Direct Investment in Ireland 2015". Central Statistics Office. Retrieved 19 October 2018.
  3. ^ "International trade, foreign direct investment and global value chains: Ireland: Trade and investment statistical note" (PDF). Organisation for Economic Cooperation and Development (OECD). 2017. Retrieved 19 October 2018.
  4. ^ "IDA Ireland". European Commission Research and Innovation Observatory. Retrieved 16 October 2018.
  5. ^ a b Barry, Frank; Ó Fathartaigh, Mícheál (2015). "The Industrial Development Authority, 1949–58: establishment, evolution and expansion of influence". Irish Historical Studies. 39: 460.
  6. ^ "IDA Ireland 2017 Annual Report" (PDF). IDA Ireland. 2008.
  7. ^ "An Analysis of 2015 Corporation Tax Returns and 2016 Payments" (PDF). Revenue Commissioners. April 2017.
  8. ^ a b "IRELAND Trade and Statistical Note 2017" (PDF). OECD. 2017.
  9. ^ a b "CRISIS RECOVERY IN A COUNTRY WITH A HIGH PRESENCE OF FOREIGN OWNED COMPANIES: Ireland" (PDF). IMK Institute Berlin. January 2017.
  10. ^ Walsh, Keith (9 December 2010). "The Economic and Fiscal Contribution of US Investment in Ireland" (PDF). Journal of the Statistical and Social Inquiry Society of Ireland. XL: 33–59. Retrieved 19 October 2018.
  11. ^ "Tax Reform in the UK Reversed the Tide of Corporate Tax Inversions" (PDF). Tax Foundation. 14 October 2014.
  12. ^ "How Tax Reform solved UK inversions". Tax Foundation. 14 October 2014.
  13. ^ "The United Kingdom's Experience with Inversions". Tax Foundation. 5 April 2016.
  14. ^ "IDA Ireland: Annual Report & Accounts 2017" (PDF). IDA Ireland. 10 May 2018. p. 4.
  15. ^ a b "Disappointing number of financials plan to come to Dublin post-Brexit". Irish Times. 28 December 2017. Transfers from London mainly going to Frankfurt, Luxembourg, Brussels and Paris
  16. ^ "Dublin trails Frankfurt and Paris in Brexit finance jobs race". Sunday Times. 19 September 2017.
  17. ^ "Lloyd's snubs Dublin for its EU base as the capital drops in world financial centre ranks. US insurance giant AIG also overlooked Ireland for its regional HQ". FORA. 30 March 2017.
  18. ^ a b "Minister Humphreys announces record Budget allocation for her Department to help businesses get ready for Brexit, drive regional growth and boost innovation". Department of Business, Enterprise and Innovation. 9 October 2018.
  19. ^ "A Territorial Tax System Would Create Jobs and Raise Wages for U.S. Workers". The Heritage Foundation. 12 September 2013.
  20. ^ "How to stop the inversion perversion". The Economist. 26 July 2014.
  21. ^ "Corporate Taxation in Ireland 2016" (PDF). Industrial Development Authority (IDA). 2018.
  22. ^ "Ireland is the world's biggest corporate 'tax haven', say academics". Irish Times. 13 June 2018. Study claims State shelters more multinational profits than the entire Caribbean
  23. ^ "State's 'Ireland House' in Tokyo to cost almost €23m: New building will be biggest ever capital investment by Department of Foreign Affairs". Irish Times. 17 June 2018.
  24. ^ "Warning over a hanful of foreign multinationals paying 80pc of corporate tax". Irish Independent. 22 February 2017.
  25. ^ "20 multinationals paid half of all Corporation tax paid in 2016". RTE News. 21 June 2017.
  26. ^ "Reassessing the Beloved Double Irish Structure (as Single Malt) in Light of GILTI". Taxnotes. 23 April 2018.
  27. ^ "U.S. Tax Cuts and Jobs Act: Winners and Losers". Taxnotes. 19 March 2018. p. 1235.
  28. ^ "Warning that Ireland faces huge economic threat over corporate tax reliance - Troika chief Mody says country won't be able to cope with changes to tax regime". Irish Independent. 9 June 2018. And he said the Irish economy won't cope with radical changes to international tax rules, which will dent our attractiveness to multinationals.
  29. ^ "Dublin overtakes London in most expensive cities to live in". Irish Independent. 15 March 2018. Dublin has overtaken London in a world-wide cost of living ranking because of the Brexit-induced weakening of sterling.
  30. ^ "IDA warning on our competitiveness". Irish Independent. 7 May 2018.
  31. ^ "Tight property supply constraints Dublin's Brexit appeal: Escalating prices and rents prompt anxiety about ability to draw more business". Financial Times. 31 January 2018.
  32. ^ "No Irish university in the world's top 100 as the country's higher education sector falls further in global rankings". Irish Independent. 6 June 2018.
  33. ^ Beesley, Arthur (26 February 2015). "IDA Ireland aims to provide 80,000 jobs by 2019". The Irish Times. Retrieved 16 October 2018.
  34. ^ "Despite record jobs growth, IDA warns of risks, including Brexit and US tax changes". Raidió Teilifís Éireann. 4 January 2018. Retrieved 16 October 2018.

Further reading[edit]

  • Rafferty, Colm (2012) Fuelled by foreign investment, Incisive Media Limited

External links[edit]