Loss of 12.5% tax rate won’t have ‘significant impact’ – IDA chief

Welcome certainty of corporate deal will offset rate increase, says Martin Shanahan

IDA chief executive Martin Shanahan said the Republic would have to improve on housing and utilities, particularly energy and water. Photograph: Nick Bradshaw/The Irish Times

IDA chief executive Martin Shanahan said the Republic would have to improve on housing and utilities, particularly energy and water. Photograph: Nick Bradshaw/The Irish Times

 

The loss of the State’s 12.5 per cent corporation tax rate will not have a “significant impact” on future investment, according to the chief executive of IDA Ireland, Martin Shanahan.

However, Mr Shanahan said the Republic would have to improve its offering on housing, energy and water if it wants to stay competitive and to continue attracting overseas investors.

The Republic last year signed up to the Organisation for Economic Co-operation and Development-brokered (OECD) deal on corporate tax, which will ensure big companies pay a minimum tax rate of 15 per cent, a move than effectively ends the State’s prized 12.5 per cent rate.

The “certainty and stability” of being involved in the deal will offset the marginal increase, Mr Shanahan told the Oireachtas Committee on Enterprise, Trade and Employment.

“I don’t see it having a significant impact as we go forward,” he said, noting that many of the investments made over the past year were made in the knowledge that a global deal on tax, involving Ireland, was imminent.

Last year was a record-breaking one for Foreign Direct Investment (FDI) employment, with strong gains recorded in both gross and net employment. Total employment in IDA client companies in the State now stands at a record high of 275,384, up 16,826 on 2020.

“Investors have already demonstrated they have continued confidence in Ireland in the context of this global agreement,” Mr Shanahan said.

He also noted that while the minimum rate here will be 15 per cent, many countries will have higher rates.

Intel investment

In response to suggestions by Sinn Féin’s Louise O’Reilly that the Republic may have lost out on a major Intel investment because of infrastructural deficits in housing and other areas, Mr Shanahan said Intel had not confirmed the site of its proposed multibillion euro chip fabrication plant. News agency Bloomberg is reporting it as Germany.

Intel’s investment in the State continues to be significant, Mr Shanahan said, noting the US chip giant is building two of the most advanced fabrication plants in the world at its base in Leixlip, Co Kildare.

“However, it is absolutely clear we have to improve in all aspects of our offering to remain competitive,” he said.

Ireland would have to improve on housing and utilities, particularly energy and water, Mr Shanahan said.

“But I would also say, Ireland clearly is competitive on many fronts. That is why we had ability to win the number of investments we won over the last number of years,” he said.

In its recent annual report, the IDA said that in 2021, there were 249 investments compared to 246 investments in the same period the previous year, with 104 of those from investors coming to Ireland for the first time.

“The high level of new name investments represents a vote of confidence in Ireland and a level of future proofing of FDI,” it said.