FOREIGN ENTERPRISE IN IRELAND: SOME FIGURES
Nov 25th, 2010 by Conor McCabe
Figures are from the 2008 Census of Industrial Production.
Total direct employment by foreign manufacturing companies in Ireland: 92,128.
This is about five per cent of total employment.
These figures are for manufacturing only. They do not include jobs in services.
The international and financial services and software export sector in 2008 employed around 58,000 people - and the majority of jobs in this sector are with foreign companies.
IDA-supported companies accounted for 136,000 jobs, or around seven per cent of total employment.
Foreign direct investment provides somewhere between seven and nine per cent of the jobs in this country.
With regard to multinationals and Ireland in general, in 2008 IDA-supported companies paid approx 3 billion euro in Corporation Tax, with sales of 109.64 billion.
In 2008, the direct economic impact of IDA-assisted companies was 19.149 billion euro. That includes, wages, services, and locally-sourced materials. That equates to about 10.5 per cent of GDP, or 12.3 per cent of GNP.
Now, foreign companies account for 78 per cent of merchandise exports, and around 96 per cent of service exports.
So, Ireland’s economic model is to have IDA-supported foreign companies which provide €2.8 billion in tax revenue, and €19.149 billion in wages and local service/produce purchases – which together equate to 12 per cent of GDP or 14.2 per cent of GNP.
We’re not borrowing to pay for social welfare, we’re borrowing to keep corporation tax from IDA-supported companies at 2.8 billion euro, and to have one of the most open economies in the world produce an export sector that’s worth around €22 billion to an economy which on paper in 2008 had a GDP of €181 billion and an GNP of €154 billion.
Michael Burke has a very interesting post over on progressive economy where he argues that Ireland needs to become a proper open economy – that is, one that trades actual goods and services – instead of what we have today: a glorified exercise in international accounting.
Do banking, software and pharmaceuticals count as manufacturing? There are multinationals involved there also. Corporation tax up to the full whack of eurozone 25% would probably result in my losing my job. I would think that they can safely put it back to 15%. There’s rumblings about government removing the IDA patent royalties going tax free scam. The politics of it are irritating though, while noone wants to be dictated 25% tax rate, the entrenched talk about it remaining unchanged makes it harder to put to a more sensible level of 15% or whatever.
Conor, your calculation of the effective tax rate is incorrect.
Also when you consider the relatively small number of jobs flowing from foreign investment, you need to also take account of job quality.
These jobs are on average better paid and higher-tech than the norm. In fact in a lot of fields, they’re the only game in town. Without the foreign sector we wouldn’t really have an advanced economy at all.
Really? My calculation is wrong? Have you evidence to show this?
Oh your arithmetic is perfectly fine, if that’s what you mean. I’m sure you checked it on a calculator.
But you’re just using the wrong numbers.
Here’s a more realistic estimate of the effective rates across a range of countries, including ourselves: https://media.cpa2biz.com/newsletter/2008/Tax/july/juryin_table.htm Note the effective rate is estimated as being higher than the statutory rate in our case.
Also, you might want to consider the corpo-tax:GDP ratio in a few other countries to see if we’re totally off the map: http://www.scribd.com/doc/41827087/Corp-Tax
What’s the breakdown between coporation tax paid by indigenous companies and corporation tax paid by foreign companies?
Total corpo tax receipts in ‘08 were 5.065 billion.
You calculated the foreign element of that in the same year as 3 billion.
So that would give a circa 60:40% split between foreign and native.
I meant in the figures you link to, the figures you cite.
I’m particularly interested in the 61 companies you have found that pay an average of 15.5% corporation tax.
Who are these companies that pay more corporation tax in Ireland than they are legally bound to pay?
And my figure of approx. 3 billion is for IDA-supported companies.
Its not my data, but I can tell you that all 61 are incorporated in Ireland. Not that tells us much about origin, as they could be local personalities of the global company, e.g. Amazon Data Services Ireland Ltd.
Here’s the background on the table: http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/Tax/juryin.jsp
The idea of the effective rate being greater than the statutory rate is not as whacky as you make out.
In fact, it was discussed in the Dail just last week: http://www.kildarestreet.com/debate/?id=2010-11-23.512.0
Obviously its not a case of the company voluntarily paying “extra tax” in any sense. Instead its an artifact of how taxable profits are calculated versus corporate income statements.
But you are saying that it is a more realistic estimate of the effective corporation tax rate, that realisticly speaking Ireland’s corporation tax rate is 15.5%
This is ground-breaking stuff here Peggy. Well done. It puts Bloomberg and the New York Times to shame, that’s for sure.
How much in taxable profits is the €5 billion in corporation tax based upon?
But you are saying that it is a more realistic estimate of the effective corporation tax rate, that realisticly speaking Ireland’s corporation tax rate is 15.5%
Eh, no.
The statutory rate remains at 12.5%.
The effective rate for those 61 companies is 15.5%.
These are just two different measures of the same thing.
Both are generally accepted metrics.
Unlike your definition of the effective rate, which has no currency outside of this blog.
By the way, do you always resort to sarcasm when someone points out where you’re wrong?
Huh? I’m trying to learn here Peggy.
You said that I am wrong. The evidence you have used to show that I am wrong points to Ireland having an effective corporation tax rate of 15.5%
I’m just saying well done, because it is the first time I have heard this, and it goes against what Bloomberg and the New York Times have been reporting for the past year.
But can you clear this up for me? The €5 billion in corporation tax. How much in taxable profits is that based upon?
I am confused by the data given by Peggy.
They calculate the effective tax rate for all publicly traded firms in the world. They then provide a breakdown by country of incorporation. It seems to me that the data they are using is for all companies listed as PLCs in Ireland. I might be wrong on this and I am open to correction, but that interpretation gels with what they say in the article provided. I don’t think anyone has access to Compustat, so we cannot clear up this issue by looking at the primary data.
If the data is based on firms that are listed as PLCs in Ireland, then this would most likely exclude the vast majority of foreign firms, who generally establish private limited companies in Ireland. This would necessarily exclude subsidiaries of Google, Amazon, Dell etc. from the data, since they are not publicly traded companies incorporated in Ireland; instead, they are private limited companies that are subsidiaries of publicly traded companies incorporated in the US and other jurisdictions. This would undoubtedly have an effect on the stats.
Three quotes from the article, very interesting, thanks Peggy Olson!
1. ETRs are firms’ income tax expense divided by their pre-tax incomes for the year.
2. Effective rates are the median rates for all publicly-traded companies incorporated (and publicly traded) within that country
[eg. Google aren’t publically traded on the ISEQ]
3. While many countries’ ETRs are below the statutory rates, a few have ETRs higher than the statutory rates. This is because the statutory rate only includes the national income tax rate. In contrast, firms’ reported ETRs include national, local and foreign taxes paid. For example, Cayman Island companies have median ETRs of under 10 percent, but this is comprised solely of taxes paid to other countries.
I think this table just shows how Irish corporations such as smurfit and roadstone have not benefitted as much from the corporation tax as multinationals.
http://en.wikipedia.org/wiki/Double_Irish_Arrangement
There’s a pdf at the bottom of the wiki article with exact details.
There’s a HUGE scope for trickery under the above arrangement, common knowledge abroad since 2007.