It is difficult to overstate the importance of US investment to Ireland, and not only in terms of corporation tax revenues. The statistics speak for themselves. Nearly 1,000 US companies are located here, employing more than 200,000 people directly and a further 150,000 indirectly. Every year, these companies spend approximately €30 billion in the Irish economy through wages, goods and services and capital expenditure.
Wiliam Fry partner Paul White puts the scale of that investment in context: “US assets in Ireland were worth up to $2 trillion (€1.9 trillion) in value in 2020, over four times the value of US assets in China. US affiliates spent $4 billion (€3.7 billion) in R&D expenditures in Ireland in 2020 and Ireland is the number one export platform for US affiliates in the entire world.”
More than half of the companies investing in Ireland are from the US, notes Chris Collins, country president Ireland, Schneider Electric.
“These businesses contribute enormously to the national and regional economies through finance and investment, stimulating growth and driving tax revenues,” says Collins.
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“US businesses are willing to relocate to regional pockets of Ireland to set up manufacturing and operations that drive employment and attract skilled workers from the US, EU and other parts of the world. The influx of skilled workers has created a hotspot for talent, improving local and regional economies in the process, transforming small towns and villages into bustling communities.”
There are other benefits that are slightly more difficult to quantify. “US multinationals have had a profound impact on Irish business practices,” says KPMG head of technology and media Anna Scally. “They’ve introduced advanced technologies and innovations to Irish industries, enhancing productivity and competitiveness. Moreover, they’ve brought modern management techniques, efficient operational procedures and improved supply chain management.”
Many US companies prioritise corporate social responsibility, leading to increased awareness of environmental and social responsibilities among Irish businesses, adds Scally. “In relation to environmental, social and governance (ESG), and reporting standards, according to the recent KPMG 2023 CEO Outlook survey, 74 per cent of global chief executives reported having the capability and capacity to meet new ESG reporting standards, and many of these multinationals have significant operations in Ireland.”
Ireland’s attractiveness for these companies stems from a variety of factors, according to Eversheds Sutherland managing partner Alan Connell.
“In addition to providing free movement of goods, people, capital and services within the EU’s single market, Ireland offers a low-tax, EU and Eurozone jurisdiction with a pro-business environment, talented workforce, and the necessary physical, legal, regulatory and commercial infrastructure of a highly developed OECD jurisdiction, with the ease of connection to the rest of the EU and US with direct flights,” he says.
They see Ireland as the jurisdiction of choice to operate in Europe, as a launch pad into the single market and beyond. That has been a real success for the Irish economy
— Alan Connell, Eversheds Sutherland
“As such, Ireland provides an attractive platform for US multinationals and their leadership teams to do business both in Europe and beyond.”
The country also acts as a bridge or gateway to many jurisdictions. “We know internationally focused clients are not only investing in Ireland just to access the Irish market,” says Connell. “They see Ireland as the jurisdiction of choice to operate in Europe, as a launch pad into the single market and beyond. That has been a real success for the Irish economy, and also a real success for Eversheds Sutherland.”
Access to talent is another key factor. “The young, highly skilled workforce here in Ireland is renowned as being well educated, mobile, ambitious and adaptable,” adds Connell. “We also have easy access to the European market for talent through our EU membership, which is an additional benefit for US multinationals. It is the people, rich with creativity, skills and culture, who drive Ireland’s and its FDI investors’ success.”
Maintaining that enviable position is another question. Deloitte head of tax and legal Daryl Hanberry believes the existing US foreign direct investment (FDI) base in Ireland is reasonably solid but we can’t rely on what made us successful in the past for us to prosper in future.
“Many of the US multinationals in Ireland are very successful companies and play a significant role in their sectors,” says Hanberry. “They may have a bad year here and there but I would be quite optimistic for the longer term structural piece. They will emerge from current headwinds or crises, as has been the case to date.
“But we can’t take this investment for granted. We need to create a strong proposition that will sustain the FDI companies already here and attract new ones as well as to support Irish companies to grow and expand internationally.”
Looking at the ingredients for that proposition, Hanberry says income tax rates are too high. “An issue that can arise now is whether the employees of these companies want to be here. If you are moving from the US to Ireland, the 52 per cent marginal rate of income tax is very high,” he says.
He acknowledges that Revenue’s special assignee relief programme (SARP) helps but believes our income tax rate is still too high.
“The other thing we need to do is address infrastructural issues in areas like housing and energy,” says Hanberry. “Again, I know the Government is working on these things. We need to pull together our next FDI strategy. Previously it was around the 12.5 per cent corporation tax rate. We need the next one to be around what will attract people to want to come to live and work in Ireland.”
Scally echoes the point in relation to income tax. “Access to talent is a key priority, so Ireland’s personal tax regime must be attractive relative to what is on offer in other countries and reformed to accommodate the new working practices,” she says.
“Recent announcements in Budget 2024 included increasing income tax rate bands and tax credits and reducing USC. While these measures are welcome, more enhancements to Ireland’s personal tax regime are needed.”
Political questions also come into play. “Maintaining our status as an appropriate destination to the US for friend-shoring, or ally-shoring where the US shifts production and supply chains to trusted international partners will be important,” says William Fry partner Andrew McIntyre.
“Future Irish administrations need to maintain our existing pro-business and pro-enterprise policies. They also need to develop policies to allow Ireland to adjust to and benefit from future market and technological conditions such as the increasing need for sustainable energy and the rapid rise of AI.”