IDA: Corporate tax reform threat not denting Ireland's appeal to multinationals

IDA chief executive Martin Shanahan said global foreign direct investment flow is expected to increase by up to 15% this year and multinationals continue to have 'significant confidence' in Ireland

IDA chief executive Martin Shanahan, Tánaiste Leo Varadkar, and IDA chairman Frank Ryan at the launch of the IDA's half-year results.

Ireland is on a “positive trajectory” in terms of in-bound multinational investment growth, the IDA has said, despite the potential threat from global corporate tax reform.

And, the Tánaiste said the Government would aim to nullify stealth taxes, partially to maintain Ireland’s attractiveness to foreign multinational workers.

The IDA said Ireland attracted 142 foreign multinational investments in the first half of the year, 8% up year-on-year and close to 2019 pre-Covid levels. 

Among the investments, 62 were from companies with no previous presence here, while nearly half were in regional locations outside of Dublin.

IDA chief executive Martin Shanahan said while there is “nothing certain” about the trajectory of the pandemic or economies, global foreign direct investment (FDI) flow is expected to increase by up to 15% this year and multinationals continue to have “significant confidence” in Ireland.

“That is down to the stability of the taxation regime and rate over many years and that’s why we continue to see the numbers that we are seeing,” he said.

New global tax framework

While a new global tax framework is more likely than not, Mr Shanahan said client companies are not spooked by Ireland not initially signing up to OECD proposals and looking to further negotiate the minimum corporate tax rate detail within them.

“It will be important that working within any new global tax framework, Ireland continues to offer stability and a competitive offering to investors,” he said.

Attending the latest IDA report launch, Tánaiste Leo Varadkar defended the Government’s choice to further negotiate corporate tax reform terms.

“We shouldn’t be under any illusion as to what is going on here. This isn’t just about tax justice and big companies paying their fair share of tax. This is also about big countries trying to get a bigger share of the pie,” Mr Varadkar said.

He said Ireland is looking after its interests, just as the UK and the US are doing for themselves as part of the process.

“It’s much better for us to be part of an agreement than be outside it and we do want to shape that agreement…[but] we’re not going to sign up to – or endorse – an agreement that doesn’t protect our fundamental interests as a small island economy,” the Tánaiste said. 

Mr Shanahan said tax remains an important part of Ireland’s offering to multinationals, but is only one part. But, he said FDI competition from other countries is “significant” and a close eye must be kept on all of Ireland’s competitiveness issues – from personal tax and housing to air connectivity.

Capital expenditure

The Tánaiste said the Government would “not be found wanting” when it comes to capital expenditure. 

He said Ireland’s high marginal tax rate issue can be tackled. While there will be no income tax cut in the next budget, the Government will aim to stop stealth tax increases and help avoid people falling into the higher tax net and paying more of their income at a higher rate, he said.

The IDA said there was potential for more than 12,530 jobs from multinational investments made in the first half, up from 9,600 job opportunities a year ago.