Ireland: Country and Foreign Investment
Ireland Is In The EU . . .
Ireland is one of the 27 Member States of the EU, and who could deny that membership has been a blessing for it, until recently at least? From being one of the lame ducks of Europe, Ireland reinvented itself as the fastest-growing EU state in the late 1990s and 2000s, the future centre of EU e-commerce, and a thoroughly communautaire country unlucky enough to be separated from the continent by the euro-sceptic British. Ireland held the Presidency of the EU for the first six months of 2004 and again for the first six months of 2013.
. . . and Ireland is offshore.
Perhaps only the Irish imagination could successfully have combined full-hearted membership of the EU with a piratical determination to out-Jersey the tax commissioners of the Western World; but they seem to have succeeded.
Ireland has a population of more than 4.7m, of whom over 1m live in Dublin, the centre of government and business. Ireland is a parliamentary democracy with two houses of parliament, the Dail and the Seanad. Executive Government is led by the Taoiseach (prime minister). There is a separate Judiciary and a largely honorary President. The climate is temperate; average temperatures 15 C (summer) and 5 C (winter). Until 2002 the currency was the punt, IR£, which was a member of the European Monetary System since it began; Ireland then adopted the euro, which began to be used on the street in 2002. Its introduction was smooth.
The primary language in Ireland is English, and the youthful population is well-educated. The legal system is largely copied from the English common-law system, although the more continental influence of EU law is beginning to be felt.
The most dramatic aspect of Ireland's reinvention of itself has been a boom in high-technology investment. Although since 2001 the world-wide high-tech slump has had an impact, Ireland became the preferred jumping-off point for US high-tech firms entering Europe.
Ireland agreed a corporation tax rate of 12.5% with the EU to apply generally from 2003, and appeared until recently to have resolved differences with the EU over its 'offshore' regimes in a way that appears highly satisfactory for the Irish. Ireland has become a favoured destination of foreign, particularly American, companies entering the EU market-place, and successive EU enlargements can only reinforce this trend.
Since the economic downturn Ireland's export sector is a key component of its economy along with an industry and service sector which have replaced agriculture as the most important sector. Prior to the financial crises the Irish government introduced a number of measures to promote foreign investment. The most important ones were (they have now been overtaken by a general 12.5% rate of corporation tax) the '10% manufacturing rate of tax' which applied quite widely in and out of manufacturing, the Shannon Airport Free Zone and the International Financial Services Centre in Dublin, aimed at banks, insurers, mutual funds and the securities industry. Both Shannon and the IFSC offered 10% tax rates.
Growth averaged 6% until 2008, when Ireland fell victim to the global recession, and output fell by 3.6%. 2009 saw a slump of 7.6% and estimates for 2010 put GDP declining further by 1.6%. Growth of 1.4% was estimated, and achieved, for 2011. In 2012, growth slowed to 0.7%, however, deficit was down to 8.5% of GDP.
The Irish government was forced to introduce a number of draconian budgets, starting in 2009. Wage cuts for public sector employees and other across the board cuts proved insufficient however, and Ireland was forced to agree to a EUR85bn loan from the EU and IMF in 2010.
Since March 2011, the new government has intensified austerity measures in an effort to meet the deficit targets under Ireland's EU-IMF programme.