State could benefit more from FDI

In a recent opinion piece, it was argued “one of the great challenges facing modern societies is balancing the need to raise revenue to secure essential services, but doing so without curtailing business growth.”

The overall gist of the piece was that the business group Retail Ireland had noted general economic trends were positive and that the recovery remains on track.

It went on to bemoan “punitive” tax rises.

The essence of the argument was while “we should encourage economic activity, we should also have the courage to say that a certain level of tax is needed.”

The piece specifically noted how little direct taxation is paid by a number of multinational corporations.

As most of us now realise multinational corporations aka foreign direct investment or FDI for short, plays a huge part in the Irish economy.

There are over 1,000 multinationals employing tens of thousands of citizens in high quality, well-paid jobs. In many ways they are the backbone of the economy.

Indeed, it could be argued that but for so many major companies providing employment and exporting to the world, that the economic recovery would not have happened.

The vast bulk of these companies contribute to the economy in many ways.

They provide jobs, opportunities for the construction industry and underpin indirect jobs.

They bring new skills and purchase local goods and services. 

People paid by these companies pay direct and indirect taxes.

The firms themselves pay around €2bn in corporation tax. It’s a lot of money. 

But could we get greater benefit from the presence of these companies?

There are undoubtedly those companies who seriously milk the system and pay very little either in Ireland or anywhere else for that matter.

Our bigger European neighbours are seeking to find ways to reduce any benefit we might accrue.

In recent times, we have seen the naked power and arguably the unfair and unreasonable treatment of other countries by the bigger members of the EU.

European solidarity is not necessarily a thing of the past, but it is going through a very tough time.

We need to prepare for a time when these countries reduce our ability to maximise the return from foreign multinationals.

Clearly, we need essential services but at what cost and to what extent?

We need to determine the real level of essential services required and the cost of those services.

The performance of many state sector organisations leaves much to be desired.

The HSE is a case in point. In excess of €10bn is poured into this organisation every year and it appears to be one of the worst performing entities in the state.

It clearly is not fit for use as structured yet it is clearly an essential service.

Newly minted Irish Water is another case in point. Much has been written about this company but despite its myriad of shortcomings, government refuses to do anything about it.

There are many other examples of entities where the entity is structured on how it benefits the employee rather than the customer.

We need to ensure we are not demanding too much by way of taxation. But we do have to ensure that those companies which benefit from being in this country also pay for the privilege.

Our headline corporation tax rate is 12.5%.

It is really not asking too much that companies should pay that level of tax, or close to that level.

It appears that we are not getting the very best out of many of the newer companies coming to these shores.

The lack of availability of appropriate skills for these newer companies has been written about in recent weeks.

So while we get the benefit of employee taxes and the resulting expenditure in the economy, we do not always maximise the number of Irish citizens employed.

This may be because of the language skills required, or indeed the skills required, for many of the newer technologies.

Having these companies here is not just about taxation.

As has been said, much has been done but there is clearly much to do.


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