TBS Global Business Forum 2017: Embracing Disruption: Finding opportunities in crisis
“Weaning ourselves off foreign-owned MNCs”
– Frank Barry, Chair of International Business and Development
Half full or half empty? Critics of Ireland’s industrial development strategy suggest that the country is overly dependent on foreign direct investment (FDI). Scarce resources, they argue, would be better employed in assisting the development of indigenous firms. Opponents of this view point to the vastly greater resources already employed in assisting indigenous industry and highlight the positive spillovers emanating from the foreign sector.
Padraic White, former Managing Director of the IDA, has referred to Ireland’s corporation tax regime as “the unique and essential foundation stone of Ireland’s foreign investment boom”. The tax regime, a cornerstone of Irish industrial policy since the mid-1950s, is threatened on multiple fronts. A subcommittee of the US Senate, reporting in 2012-13, found that many US MNCs exploited mismatches between the US and Irish tax regimes to minimise their global tax liabilities. A concurrent investigation by the Public Accounts Committee of the UK House of Commons into the tax affairs of companies such as Amazon, Google and Starbucks also found Ireland to feature frequently as a link in the tax-avoidance chain.
Ireland has responded by closing off the “double Irish” tax loophole which Apple had exploited particularly aggressively by funnelling profits through Ireland to end up in corporate entities that were tax resident nowhere in the world. In a separate development the European Commission has recently determined that Ireland had offered Apple inappropriate ‘sweetheart’ tax deals. While the thrust of the OECD’s ‘base erosion and profit shifting’ (BEPS) initiative is to align more closely the location of taxation and economic activity, ongoing discussions within the EU on a common consolidated corporate tax base are even more prescriptive and potentially damaging to Ireland’s export-platform status. Proposed changes to the US tax code signalled by the Trump administration – and pressure on US MNCs to ‘re-onshore’ to the US – have further served to keep these topic to the forefront of public attention.
Many now think that Ireland’s corporation tax strategy has reached the end of its useful shelf life. Is Ireland likely to see a sharp decline in inward FDI, and, if so, how will Irish indigenous industry respond to the challenge?
While Irish firms have to compete with foreign MNCs for skills and talent they also benefit in ways from the strong foreign-MNC presence. Professor Paul Ryan of the TCD Business School has identified positive spillovers to indigenous firms in the medical devices sector, while Professor Frank Barry, also of TCD, has shown that the diversity of the FDI presence was an important factor in the emergence of a dynamic indigenous Irish software sector.
Would indigenous industry gain or lose from a reduction in the size of the FDI sector? And if Ireland is thrown back onto its own resources, what new strategies can be developed to increase the dynamism of Irish-owned industry?
Professor Frank Barry will host a panel to discuss these topics. Participants include economist and commentator Colm McCarthy, indigenous tech entrepreneur Geraldine Magnier, co-founder and director of Idiro Analytics, and Douglas Dowley, entrepreneur and business mentor with Enterprise Ireland.
For more information on embracing disruption, come to the Trinity Business Alumni Global Business Forum – tickets available here.