Industrial Development Agency (IDA Ireland) ( ga, An Ghníomhaireacht Forbartha Tionscail) is the agency responsible for the attraction and retention of inward foreign direct investment (FDI) into

Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...

. The agency was founded in 1949 as the Industrial Development Authority and placed on a

statutory A statute is a formal written enactment of a legislative authority that governs the legal entities of a city, state, or country by way of consent. Typically, statutes command or prohibit something, or declare policy. Statutes are rules made by ...

footing a year later. In 1969 it became a non-commercial autonomous state-sponsored body. Today it is a

semi-state body A State-Sponsored Body is the name given in Ireland to a state-owned enterprise (a government-owned corporation), that is to say, a commercial business which is beneficially owned, either completely or majority, by the Irish Government. Each state-s ...

that plays an important role in Ireland's relationship with foreign investors, with multinationals accounting for 10.2% of employment and 66% of Irish exports. The agency partners with investors to help them to begin or expand their operations in the Irish market. It provides funding support to

research and development Research and development (R&D or R+D), known in Europe as research and technological development (RTD), is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existi ...

projects, and has a number of direct support mechanisms, including employment and training grants.

History

In the years following World War II, Ireland began moving towards a more open economic model, away from the old model characterised by

import substitution industrialisation Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.''A Comprehensive Dictionary of Economics'' p.88, ed. Nelson Brian 2009. It is based on the premise that ...

. As part of this wider push, the Minister for Industry and Commerce at the time,

Daniel Morrissey Daniel Morrissey (28 November 1895 – 4 November 1981) was an Irish Fine Gael politician who served as Minister for Justice from March 1951 to June 1951, Minister for Industry and Commerce from 1948 to 1951 and Leas-Cheann Comhairle of Dáil � ...

, proposed the creation of a body to advise the government on

industrial policy An industrial policy (IP) or industrial strategy of a country is its official strategic effort to encourage the development and growth of all or part of the economy, often focused on all or part of the manufacturing sector. The government takes m ...

. The Industrial Development Authority was created to fill this role in 1949. Throughout the 1950s, the IDA established its vision of 'industrialisation by invitation,' one which initiated the low corporation-tax system that remains in place in Ireland today. According to an article in a U.S. law journal in 1984, the IDA is 'probably the most powerful governmental agency in Ireland,' as it 'acts as both coordinator and lobbyist for all matters relating to manufacturing and service industries as well as the industrial infrastructure.' IDA Ireland has a large global network of branches/offices in the U.S., Europe, and Asia.

Governance and funding

While IDA Ireland gets its funding from the Irish State (with costs circa €48m in 2017), as an autonomous non-commercial state-sponsored body, it maintains its own independent board and governance. IDA Ireland is authorised to issue grants and financial incentives to firms coming to Ireland (paying out €91 million in 2017).

Successes

The IDA has been successful in attracting multinationals to Ireland over decades. As of 2018, foreign multinationals pay 80% of all Irish corporate taxes, directly employing 25% of the Irish labour-force, and are responsible for 57% of the non-farm economic value-add in Ireland (40% of value-add in Irish services and 80% of value-add in Irish manufacturing). They comprise 14 of Ireland's top 20 firms (including

tax inversion A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus mov ...

s). Key "selling points" have been the young, English-speaking, flexible workforce, a strong educational system, commercially-aware third level institutions, a location which allows easy exporting into Europe, and the ability to tap into European talent in the wake of Brexit, and a 'clustering effect' in certain industrial and business sectors.

Criticisms

Narrow base

The IDA is strongly reliant on the U.S. as a source of FDI. There are no non-U.S./non-U.K. firms in Ireland's top 50 firms (by revenue), and only one by employees, the German retailer Lidl. The 14 foreign multinationals in Ireland's top 20 firms are all U.S-based (including

s). The U.K. firms in Ireland, outside of retailers like Tesco who sell into Ireland (also like Lidl), are pre-2009 after which the U.K. changed its tax code (see U.K. transformation).

Taxation

Up until 2018, the U.S. was one of the last few global jurisdictions not to run a "territorial" tax system (the U.K. switched in 2009–12). Jurisdictions with "territorial" tax systems have separate, and much lower, tax rates for foreign-sourced profits, and companies from such places therefore make less use of Ireland as a base. While the IDA market Ireland as a base from which to sell into Europe, Despite other features, some commentators see Ireland as a base for U.S. multinationals to shield themselves from the pre-TCJA “worldwide” tax system (Ireland is sometimes described as a

corporate haven Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due ...

). U.S. multinationals aside, Ireland's main attractiveness is for life sciences manufacturing, who have an optimal combination of intellectual property and tangible assets to use Ireland's main IP-based BEPS tool, the

capital allowances for intangible assets The Double Irish arrangement was a base erosion and profit shifting (BEPS) corporate tax avoidance tool used mostly by United States multinationals since the late 1980s to avoid corporate taxation on non-U.S. profits. It was the largest tax ...

scheme (which has an Irish

effective tax rate In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be p ...

of <3%). A key IDA Ireland target market is Japan, which is a large global source of life sciences manufacturing enterprises, and also has one of the highest corporate tax rates in the world.

Brexit

The IDA has listed managing Brexit as a priority in the coming years. Ireland has been criticised for failing to win substantive London business, and particularly the valuable financial services business, as a result of

Brexit Brexit (; a portmanteau of "British exit") was the withdrawal of the United Kingdom (UK) from the European Union (EU) at 23:00 GMT on 31 January 2020 (00:00 1 February 2020 CET).The UK also left the European Atomic Energy Community (EAE ...

. However, the IDA has been credited with achieving limited success in the face of housing and infrastructure shortages and regulatory hurdles, and a 2018 S&P Global Market Intelligence study found that Germany and Ireland were the leaders in attracting financial businesses relocating from London. In the Irish government's 2019 budget, IDA Ireland was allocated €2 million for the purposes of Brexit preparedness and increasing Ireland's "global footprint".

Challenges

The majority of foreign multinationals in Ireland are also concentrated in a small group of very large technology and life science firms. These firms have the "

intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...

" (or IP) needed to use Ireland's IP-based BEPS tax tools (which have effective Irish corporate tax rates of <3%). Ireland's largest company Apple, post their giant

BEPS Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations where there is little or no economic ...

inversion in 2015 (see "

leprechaun economics Leprechaun economics was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Irish Central Statistics Office (CSO), restating 201 ...

"), now represents circa 25% of Irish GDP. Because of Apple, the

Central Bank of Ireland The Central Bank of Ireland ( ga, Banc Ceannais na hÉireann) is Ireland's central bank, and as such part of the European System of Central Banks (ESCB). It is the country's financial services regulator for most categories of financial fi ...

has had to replace Irish GDP with

modified gross national income Modified gross national income, Modified GNI or GNI* was created by the Central Bank of Ireland in February 2017 as a new way to measure the Irish economy, and Irish indebtedness, due to the increasing distortion that the base erosion and profi ...

(or GNI*). As well as the beneficial use of Ireland's IP-based BEPS tax tools, and a relatively low corporation tax, there remain a range of other reasons for IDA Ireland's successes, including the English-speaking location to tap into European talent in the wake of Brexit, the highly skilled workforce, and 'clustering effect'. With the overhaul of the U.S. tax code under the

Tax Cuts and Jobs Act of 2017 The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, , is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs A ...

, and a switch to a "territorial" system, it has been shown the net effective tax rates in the U.S. and Ireland are now almost identical, even with the replacement single malt system still in place (see effect of TCJA on Ireland). There is a concern whether Ireland will suffer in such an environment, both in terms of keeping existing U.S. multinationals and attracting more. This is amplified by Ireland's mid-range competitiveness in most non-taxation related aspects; the country is usually positively cited for ease of doing business, but other aspects are seen as less successful (see, for example, the

Global Competitiveness Report The ''Global Competitiveness Report'' (GCR) is a yearly report published by the World Economic Forum. Since 2004, the ''Global Competitiveness Report'' ranks countries based on the Global Competitiveness Index, developed by Xavier Sala-i-Martin ...

, where Ireland typically places in the 20th-25th world ranking range).

Plans

In 2015 the Irish government announced a five-year plan for the IDA aimed at accelerating economic recovery in the country, setting a target of 80,000 jobs by 2019 and investing €150 million in a regional property programme. This jobs target was reached in 2017. In its 2019 budget the Irish government allocated an additional €10 million to the property programme to promote regional development.

References

External links

*
Enterprise Ireland
{{authority control Government agencies of the Republic of Ireland Economy of the Republic of Ireland Investment promotion agencies Industrial development agencies Communications and media organizations Companies established in 1949