Over the recent tumultuous years, international corporations have been a robust pillar of support, managing to weather Covid lockdowns and cost-of-living crises. The revenue from corporate taxes more than doubled, rising from nearly €11 billion in 2019 to almost €23 billion in the following year. This increase significantly eased the strain on the treasury.
In the last ten years, Ireland’s approach to drawing multinational investments has surpassed even the most optimistic projections. However, looking forward, warning signs are starting to appear that could jeopardise Ireland’s model for attracting multinational companies. Despite the remarkable tax returns, some warning signs might have been overlooked. Although the warning lights aren’t flashing red yet, they have turned orange.
There are many reasons why multinational companies may choose to set up in Ireland; a thriving multinational base, a skilled labour force and a steady political environment continue to be enticing factors.
Ireland has diligently concentrated on the potential risks of changes in multinational tax laws over recent years. This risk was temporarily alleviated by the tax agreement put forth by the Organisation for Economic Co-operation and Development (OECD) and Ireland’s decision to impose a 15% rate on the largest firms. However, it’s still crucial to remember that OECD’s deal hasn’t been fully implemented yet and recent remarks by US President Joe Biden regarding a proposed global tax rate of 21% for US companies, which exceeds the OECD-agreed rate, suggest that there’s still considerable uncertainty.
The tax boom has funded projects such as the Children’s Hospital, but will it sustain long enough to finance Dublin’s Metro?
This move by Biden is more electoral posturing than a policy that Congress might approve. Even so, it does highlight that corporate tax payments continue to be a contentious issue on the political stage. As a major beneficiary of the current tax system, Ireland continues to attract attention. The existing tax system may no longer be as enticing as it was before.
There are still compelling reasons why corporations might choose to set up in Ireland. It still offers an existing multinational base, a talented workforce, and political stability. Commitment to drawing in and retaining multinational corporations is a shared goal amongst all Irish parties, even though Sinn Féin’s personal tax policies might raise some questions in the corporate world.
Chatting with those entrenched in the global business sector or those aware of its sentiment, you gather whispers about serious concerns. Huge corporations, when mapping out projects of half a decade or more, need guarantees that from 2030, Ireland can reliably provide clean water and renewable energy. Housing too, poses a concern, but energy and water are the fundamentals. Official promises that no immediate danger lurks are not swaying these corporations. The question remains, can Ireland deliver in the long run? The main worries, centred around planning and politics, cast doubts on the situation.
Apple’s choice to halt its data centre scheme in Athenry in 2018 following a three-year hold-up in the approval process made waves in the corporate world. It starkly demonstrated a planning system that is inadequate. In addition to gaining approval for their own projects, international companies recognise that Ireland’s bold plans for energy and water hinge on a multitude of planning decisions.
A red flag that went largely unnoticed was Intel’s move in late 2021 to opt for Magdeburg, Germany over Oranmore, Galway for a substantial new semiconductor investment. This was glossed over by Intel’s commitment to invest additional billions in its factory in Leixlip, Co Kildare. Yet, chatter at the time reflected concerns about the planning speed for the plant and the delivery of crucial energy and water infrastructure. It’s not about guaranteeing a positive outcome — it’s about promising a definitive timetable.
Recession in Ireland, is it?
The political will to tackle long-term and often challenging decisions is arguable. Not so much a matter of the incorrect decisions being made, it’s more commonly a case of no decision being made, or a decision landed on after much deliberation. The primary expert assessment on the North-South electricity interconnector was delivered in 2016, but the Government later ordered an additional report and then a third-party review. Despite this, construction hasn’t commenced. It appears to be all about evading a decision.
Occasionally, Irish politics does react swiftly. Fears of power shortages due to the failure of new auctions for gas-powered energy plants in 2021 precipitated rapid decisions for emergency power generation that should serve as a band-aid for a short while. The narrative of “no immediate threat” carries on.
The shift towards renewable energy is fraught with slivers of policy vagueness in the long run, particularly on managing the transition and the role of gas in it. There are looming warnings from EirGrid regarding a potential shortcoming in power generation capabilities. The question of how to address this deficit whilst offshore wind energy is still in progress remains unresolved.
Upcoming local and European elections in early June, coupled with a possible general election later this year, attribute to the risk of further delays. The recent clash between the Minister for the Environment, Eamon Ryan, and the Minister for Enterprise, Simon Coveney, over data centres at a cabinet committee meeting exemplifies this policy inconsistency. Coveney advocates moving forward, considering the centres as tech sector infrastructure, whereas Ryan expresses apprehension regarding electricity demand leading to increased short-term dependence on gas-fired supply. Questions arise about the planning system’s competence handling permits and approvals for new offshore projects, and the sluggish rate of proposed development on Ireland’s west coast amplifies this.
The impending local and European elections and the potential general election later in the year ratchet up the risk of further stagnation. For instance, it seems likely that the government may postpone a verdict on Irish Water’s proposal for a pipeline from Shannon across the Midlands to Dublin until after the incoming elections at least. Meanwhile, the capacity to provide water supply for residential and industrial growth throughout most of the nation is progressively dwindling.
Persistent influx of new investments in sectors such as pharma demonstrate Ireland’s enduring appeal to foreign investors. However, the growing discontent cannot be overlooked. A precarious credibility gap is emerging regarding our capability to realise long-term plans.