Ireland’s tax system is sometimes criticised by those campaigning against corporate tax avoidance. However, what is often overlooked is the fact that Ireland’s low rate of corporate tax attracts high volumes of physical investment.
Ireland Wins Strong Share Of Foreign Direct Investment
IDA Ireland, the foreign investment agency of the Irish Government, announced in July 2015 that Ireland has won a strong share of global investment for Dublin and regional locations in the first half of 2015, despite intense international competition and economic uncertainty in Europe.
In the first half of 2015, IDA approved 110 investment projects, and these are expected to lead to creation of 9,000 direct jobs this year and over future years as the companies gradually roll out their investment plans. This is a slight improvement on the first half of 2014, when 100 projects were approved, and 8,000 direct jobs were created.
Several household names feature among the new investment projects. They include Apple’s €850m investment in Athenry, Galway; Alexion Pharmaceutical’s €450m investment in its first biologics facility outside the US; Facebook’s plan to construct a new data centre in County Meath; and Johnson & Johnson Vision Care’s €100m expansion of its site in Limerick.
“The first half of the year represented a very strong performance for Ireland from an FDI perspective, particularly when one considers the challenging backdrop in Europe and parts of Asia,” observed IDA Chief Executive Martin Shanahan. “It is very satisfying that major global players are voting confidence in the Irish economy, which is set to be the fastest growing in Europe this year, with FDI playing a strong part in that performance.”
High Level Of Investment From United States
The level of foreign direct investment originating from the United States is particularly striking. According to the American Chamber of Commerce in Ireland, US companies have invested over $277bn in Ireland since 1990, and 140,000 people are now directly employed by 700 US firms. Remarkably, US direct investment stock in Ireland totalled a record $311bn in 2013, a greater investment stake than Germany and France combined ($196bn). Another notable statistic is that while total US investment into Europe fell by 19% in the first nine months of 2014 compared with the same period in 2013, US flows to Ireland surged nearly 42%, to roughly USD37bn.
AmCham Ireland also points out that US firms contribute €3bn to the Irish Exchequer in taxes and an additional €13bn in expenditure to the Irish economy in terms of payrolls, goods and services employed in their operations.
Why Choose Ireland For Business?
A number of factors combine to make Ireland such a magnet for foreign direct investment. Probably top of the list is Ireland’s advantageous corporate tax regime, buttressed by the low 12.5% corporate tax rate. Indeed, Ireland has one of the most favourable business tax regimes in the world according to PwC, which ranks the country 6th out of 189 jurisdictions in its Paying Taxes Index, an indicator of how easy it is for an average-sized company to discharge its tax obligations.
A commitment by successive governments to maintain a favourable tax and regulatory regime, including with the recently announced Tax Roadmap, has also reassured foreign investors. It is noteworthy that the Heritage Foundation considers Ireland’s economy one of the freest in the world, ranking it 9th out of 178 nations in its Index of Economic Freedom.
Other important factors include Ireland’s membership of the European Union and the country’s well educated and skilled workforce.
In short, there is a long list of benefits in choosing Ireland as a location to do business in, which is why foreign direct investment in Ireland continues to grow.