Isme: Ireland's reliance on multinationals is 'a national emergency'

Isme CEO Neil McDonnell said the Government should treat the issue as a national emergency and take urgent action to strengthen indigenous enterprise. File picture: Fennell's

Irish governments have been “sleepwalking” towards a potential economic crisis by failing to reduce the State’s dependence on foreign direct investment, according to Isme, the representative body for small and medium businesses.

Chief executive Neil McDonnell said the Government should treat the issue as a national emergency and take urgent action to strengthen indigenous enterprise.

“The Government needs to stop kicking the can down the road,” he said. “It needs to come up with a solution.

“This is a national emergency because if huge foreign companies based here decide to change the way they pay their tax, or if they relocate, this country is in real trouble.

“Too much of our annual spending needs depend on foreign companies based here.”

Mr McDonnell was speaking after attempts by Isme to encourage government ministers and officials to come up with a solution on how to reduce the country’s dependency on foreign direct investment (FDI).

Isme lobbying on behalf of businesses

According to lobbying records, Isme has this year lobbied three Government ministers, 18 TDs and senators, and a number of special advisers and economic experts.

Among those contacted were Hugh O’Connell, a former journalist and now deputy government press secretary at the Department of the Taoiseach; Department of Enterprise special adviser Brian Keegan; and Stephen Kinsella, economic adviser to Tánaiste Simon Harris.

Isme also engaged with ESRI professor Kieran McQuinn, who advises Taoiseach Micheál Martin on economic matters.

Despite those representations, Mr McDonnell said no meaningful response had been proposed by the Government.

Everything agrees something needs to be done, he told the Irish Examiner. “But in terms of making any actual positive headway on that, I don’t have anything positive to report.”

Mr McDonnell wants the Government to invest more in measures that help “indigenous” businesses grow.

He said the Government needed to do for Irish-owned businesses what it had successfully done for multinational companies by creating the conditions for them to grow, invest, and create jobs in Ireland.

“They did this by very actively courting them through IDA Ireland and the tax system,” said Mr McDonnell.

“This is what Italy did with its own domestic enterprise base 10 years ago after the financial crash.

“It worked and, last year, Italy overtook Japan in global exports.

Training and digitalisation highlighted

“The Government here needs to, for example, bring in more tax incentives for training and accelerate capital allowances to bring on digitalisation faster.

“These are among the things the Italians did, and they worked.

“We are inviting the Government to come up with a counter proposal, but we haven’t heard that yet. We are all ears.”

According to Irish Fiscal Advisory Council estimates, US multinational companies account for around three-quarters of all corporation tax receipts in Ireland.

'Invest in upskilling and training'

Mr McDonnell said the Government should pay greater attention to the views of the business community, citing its decision to allocate more than €1.5bn from the National Training Fund to higher education.

He argued that a significant portion of the funding would be better spent on upskilling and retraining existing workers, particularly those in their 40s and 50s.

“The Organisation for Economic Co-operation and Development has already said our school leavers and university students are already globally competitive,” he said.

“But it is our in-work adults that are the laggards when it comes to upskilling and, for example, early adoption of AI.

“So the Government is, in our view, spending this money in the wrong place.

“One of the ways it could help Irish businesses based in Ireland is to spend more money helping existing workers upskill and to remain competitive here and abroad.”