Industrial Development Authority
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IDA Ireland () is the agency responsible for the attraction and retention of inward
foreign direct investment A foreign direct investment (FDI) is an ownership stake in a company, made by a foreign investor, company, or government from another country. More specifically, it describes a controlling ownership an asset in one country by an entity based i ...
(FDI) into
Ireland Ireland (, ; ; Ulster Scots dialect, Ulster-Scots: ) is an island in the North Atlantic Ocean, in Northwestern Europe. Geopolitically, the island is divided between the Republic of Ireland (officially Names of the Irish state, named Irelan ...
. The agency was founded in 1949 as the Industrial Development Authority and placed on a
statutory A statute is a law or formal written enactment of a legislature. Statutes typically declare, command or prohibit something. Statutes are distinguished from court law and unwritten law (also known as common law) in that they are the expressed wil ...
footing a year later. In 1969 it became a non-commercial autonomous state-sponsored body. Today it is a semi-state body 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 some countries as OKB, experiment and design, is the set of innovative activities undertaken by corporations or governments in developing new services or products. R&D constitutes the first stage ...
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 protectionist trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency ...
. 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 Industrial policy is proactive government-led encouragement and development of specific strategic industries for the growth of all or part of the economy, especially in absence of sufficient private sector investments and participation. Historica ...
. 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
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). 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 (business), incorporation of regional or main company ...
). 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 mainly by United States multinationals since the late 1980s to avoid corporate taxation on non-U.S. profits. (The US was one of a sm ...
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. The tax rate that is applied to an individual's or corporation's income is determined by tax laws of the country and can be in ...
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 "Britain" and "Exit") was the Withdrawal from the European Union, withdrawal of the United Kingdom (UK) from the European Union (EU). Brexit officially took place at 23:00 GMT on 31 January 2020 (00:00 1 February ...
. 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, co ...
" (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 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 Gross domestic product, GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Central Statistics Office ( ...
"), now represents circa 25% of Irish GDP. Because of Apple, the
Central Bank of Ireland The Central Bank of Ireland () is the national central bank for Ireland within the Eurosystem. It was the Irish central bank from 1943 to 1998, issuing the Irish pound. It is also the country's main financial regulatory authority, and since 2 ...
has had to replace Irish GDP with
modified gross national income Modified gross national income (also Modified GNI or GNI*) is a metric used by the Central Statistics Office (Ireland) to measure the Irish economy rather than Gross national income, GNI or GDP. GNI* is GNI minus the depreciation on Intellectual ...
(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 ...
, 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) was a yearly report published by the World Economic Forum. Between 2004 and 2020, the ''Global Competitiveness Report'' ranked countries based on the Global Competitiveness Index, developed by Xavier Sa ...
, 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.


See also

*
State Agencies of the Republic of Ireland State Agencies or Non-Commercial State Agencies in Ireland are public sector bodies of the state that have a statutory obligation to perform specific tasks on behalf of the Government of Ireland. Such agencies are considered "arm's length" bodies ...
*
Enterprise Ireland Enterprise Ireland is an Irish state economic development agency focused on helping Irish-owned business deliver new export sales. The aim of Enterprise Ireland is to help Irish enterprises to "start, grow, innovate and win export sales in glo ...
* Forfas *
IBEC Ibec is an Irish business representative lobbying organisation and human resources services provider. Ibec is directed and managed by a board, national council, and executive director team. History Ibec is an orphan acronym dating from a 2 ...
*
Shannon Development Shannon Development (legally the ''Shannon Free Airport Development Company Limited'' formerly known as SFADCO) was an important regional development body for the Shannon Region of Ireland. Its area in the lower River Shannon basin comprised al ...
*
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 (business), incorporation of regional or main company ...
*
Global Competitiveness Report The ''Global Competitiveness Report'' (GCR) was a yearly report published by the World Economic Forum. Between 2004 and 2020, the ''Global Competitiveness Report'' ranked countries based on the Global Competitiveness Index, developed by Xavier Sa ...
*
Ireland as a tax haven Ireland has been labelled as a tax haven or corporate tax haven in multiple financial reports, an allegation which the state has rejected in response. Ireland is on all academic " tax haven lists", including the , and tax NGOs. Ireland does no ...
* ''
The Lonely Battle of Thomas Reid ''The Lonely Battle of Thomas Reid'' is a 2017 Irish documentary film directed by Feargal Ward, concerning the legal struggle between a small farmer and the power of international corporations and government institutions. Premise Thomas Reid ( ...
''


References


Further reading

* Rafferty, Colm (2012) ''Fuelled by foreign investment'', Incisive Media Limited


External links

*
Enterprise Ireland
{{authority control 1949 establishments in Ireland Companies established in 1949 Department of Enterprise, Tourism and Employment Economy of the Republic of Ireland Government agencies of the Republic of Ireland Investment promotion agencies Industrial development agencies