IDA chief says foreign investment gains will continue even with tax reforms

The Republic of Ireland will continue to secure foreign direct investment (FDI) even if plans on global tax reform come to fruition, the chief executive of IDA Ireland has said.

Speaking to The Irish Times, Martin Shanahan also said he expects physical site visits by multinational companies considering investments in the Republic to resume shortly. These came to a sudden halt as a result of the coronavirus pandemic, with all but a handful of the 142 investments secured in the first half of this year having resulted from virtual visits.

Mr Shanahan said while the State’s 12.5 per cent corporation tax rate was an important factor in attracting FDI, it is just one factor.

“What we’ve seen, particularly in the last two or three years, is that investors are focused on consistency and stability. [What] they want to know in the context of the pandemic is that the locations in which they invest can deliver for them, and Ireland obviously has a great track record in terms of this,” he said ahead of the publication of mid-year figures and IDA Ireland’s annual report.

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G20 endorsement

His comments come after G20 finance ministers at the weekend endorsed a global minimum 15 per cent corporation tax rate to which Ireland has yet to sign up to.

Mr Shanahan said it was “perfectly legitimate” for the State to make its case in negotiations on retaining the 12.5 per cent rate given its impact on investment levels here and the need for smaller peripheral nations to be able to compete effectively with larger ones.

He added there was no evidence of client companies holding off investments, with a possible deal far from agreed at this point.

Mr Shanahan said that rather than tax the number one discussion with client companies at present continues to centre on availability of talent.

He said while decisions such as that recently taken by Facebook to allow some employees in its Irish offices to work from abroad is evidence that “things will never be the same as they were,” he also does not expect this to impact on investment decisions.

“What we are hearing is that companies are anxious to get their employees back to offices when it is safe to do so for reasons such as collaboration and innovation. Also, remote working and the flexibility it offers presents opportunities, particularly for the regions where FDI investments might not have been as likely before.”

Review

New figures published by IDA Ireland on Monday show FDI inflows rebounded in the first six months to near pre-pandemic levels. Overall investments were up 8 per cent versus the 132 confirmed in the same period in 2020.

More than 62 investments were made by new clients. while almost half were secured for regional locations.

The State agency said the associated employment potential from new FDI wins is over 12,530 jobs, compared to 9,600 in the first half of last year.

In 2020 some 246 new investments were made with 20,123 jobs created. Of these some 95 investments were from new investors.

Mr Shanahan said while recovery in global FDI flows is under way after a sharp decline last year, a return to pre-pandemic levels is not expected until 2022. He added that competition for investment is also expected to intensify.

IDA Ireland’s new strategy, which was announced in January, sees it targeting 800 investments in total between 2021 and 2024 with the aim of ensuring that half of these are for regions outside of the capital. It is also seeking the creation of 50,000 jobs over the four-year period.