As a country Ireland has suffered more than most from the international financial crash of 2008 chiefly due to an over-reliance on the construction sector. But I fear that another unsustainable economic bubble has now been shaped. (Re)building an economy focused on one industry and model is a high risk strategy, a case of all eggs in one basket. For Ireland, over the past number of years our government has promoted the country as the main European headquarters and destination for largely US-based ICT corporations and industries. But alas, these firms may not be here for the indigenous educated flexible workforce and ideal working environment but rather the very generous corporate tax rate on offer.
My concern is that many of these companies are in Ireland because we facilitate tax avoidance. At present, Ireland has a corporate tax rate of just 12½% but it has been reported that some major organisations pay much less than this , although the department of Finance disputes these figures. Nevertheless, even the government’s own recently commissioned report maintains that Ireland’s corporation tax averages out “at just under 11%”  (corporate tax rates across the EU ranged from 10% to 35% ). These powerful corporations have found our leaders readily available to meet and listen to their needs  resulting in the country being at the centre of a controversial storm over multinational tax avoidance due to aggressive tax strategies deployed here by the likes of Apple and Google. Last year US senators John McCain and Carl Levin publicly stated Ireland was a tax haven after it emerged Apple paid taxes of just 2% on its foreign earnings in 2012 . The ‘double Irish’ is a tax avoidance strategy that multinational corporations use to lower their corporate tax liability. The strategy uses payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country .
Moreover, Google continues to be our biggest exporter  but I pose the question; what does Google make and how can it be appropriately quantified? While I acknowledge they build/create software such entities are very difficult to define in terms of where they are built or assembled. Code can be downloaded and uploaded from any destination in a matter of seconds/minutes so who can really tell what components have emanated from where? And exporting these products takes place virtually not in trucks and ships leaving Dublin port. Furthermore, in which jurisdiction are profits created and is it right that such profits that do not emanate from here are washed through Ireland? Seamus Coffey, a lecturer in economics at UCC, maintains; “Google does not generate its massive profits from 2,000 or so sales staff based in Dublin. These are replaceable and moveable without any significant cost or loss to Google” . This suggests a very flexible and highly mobile workforce with limited ties to Ireland. Should conditions change or opportunities to move to another European city be provided how many of these workers will dig in their heels to stay?
But surely we have a well-educated workforce to sustain this sector if others leave? On closer inspection this may not be the case. Our universities have begun to fall behind our European neighbours in term of OS rankings . In its ICT Skills Audit, the non-profit training promotion agency Fastrack to IT (FIT) estimates that there are 4,500 vacancies in Ireland’s ICT sector . These are not being filled, because of “the severely limited supply of suitably skilled applicants”. Furthermore, Irish students fall far below their EU counterparts when it comes to learning and speaking other languages. The end result is that multinational ICT companies, attracted here by our corporation tax rate, are forced to recruit staff from overseas to fill their Irish offices  and many of the multinational ICT companies have expressed concern at this skills shortage even as they establish new operations here .
That said, the importance of the digital economy to Ireland at present is significant. The ICT sector in Ireland attracts global investment with nine of the top ten US ICT companies operating here. There are over 200 IDA supported ICT companies, directly employing approximately 36,000 people, which represents 22% of total exports, estimated at €35 billion . At present, these employees live and pay tax in this country but broad questions must be asked about this sector and how sustainable it is in the long-term. The continued success, or otherwise, of this sector, moreover, may not lie in our hands. Pressure for tax reform is now coming from our European partners  the OECD  and the US . Many of these proposals aim to ensure that corporate profits are taxed where economic activities generating the profits are performed and where value is created.
As a country we have form and panache when it comes to creating unsustainable economic bubbles. Those who lived through the recession of the 1980s remember the closure of the massive FDI factories (largely built with the aid of huge tax concessions) across the country leaving many communities decimated. Our most recent bubble, fuelled by the construction sector and cheap credit, is still vivid and the hurt continues right across our society. Once again, as with previous ‘miracles’, we have no champions that question a strategy that places our recovery in the hands of large globalised corporations. I suggest that relying on the goodwill of such organisations to stay on the peripheral of Europe once fairness has been restored to the European tax system is foolhardy. I hope I’m wrong, but my gut feeling says otherwise.
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