Republic must play to its other strengths after OECD tax deal

As our tax policy changes, it is now time to develop the State’s next industrial strategy

‘The reliable and sustainable provision of energy, water and materials is an absolute essential.’ File photograph: Getty

‘The reliable and sustainable provision of energy, water and materials is an absolute essential.’ File photograph: Getty

 

Over the past few decades Ireland’s corporation tax policy has contributed to our extraordinary success in securing large and repeated investments from multinational corporations. We are now seeing changes to the global taxation environment, within a broader landscape of geopolitical shifts, economic nationalism, post-pandemic changes to how we live and work and the impacts of climate change and of digitalisation.

We need to assess Ireland’s edge in a new world, to be confident that our position is robust and to underpin strategic choices.

The 12.5 per cent corporation tax, along with other elements of the national tax environment, has been a key differentiator for Ireland. The relative simplicity and stability of our tax regime have helped to position it as a central element of our national brand, setting out a clear national commitment to welcoming foreign direct investment and providing a supportive environment.

A company will often introduce a process first in Ireland, knowing that all relevant issues will be surfaced and problems ironed out

One problem with the strength of this tax policy is that too many people, within and outside the country, have come to believe that it is not just a component of our national offering but that it is our national offering. This minimises and misrepresents what we have achieved within industry in Ireland over recent decades and clouds what we can achieve in the future.

A key feature of foreign direct investment in Ireland over recent decades has been not just the number of multinational companies nationally but the longevity of their commitment through successive waves of investment. This is based on a record of delivery in these most competitive global sectors.

A company will often introduce a process first in Ireland, knowing that all relevant issues will be surfaced and problems ironed out in a culture of quality, of excellence and of regulatory compliance. Success in process implementation has led to mandates for process development and for the development of successive generations of products. Further mandates, such as for shared services, have also followed.

This is all based on the strength of the key underpinning of our industrial success: talent.

When I speak to industry leaders about what makes Ireland competitive, they all emphasise certain characteristics of the workforce in Ireland. Along with strong technical skills, they identify communication skills and networking ability; a willingness to innovate and to take initiative, rather than waiting to be instructed; a responsiveness, adaptability and, very importantly, creativity. It seems there is a positive dynamic as people develop their careers within Irish industry that differs from that in many competitor countries.

We have been extremely well served by the quality and responsiveness of Irish higher education institutions over a period that has been marked by a massive increase in higher education participation nationally.

There are a number of possible futures on offer right now and opportunism is unlikely to get us to the best one

We attract great students into engineering and related professions, supported by initiatives such as the Steps programme of Engineers Ireland, and we give them an excellent and rounded education that develops their transferable, as well as technical, skills.

We have also grown our research system very significantly, advancing our knowledge base in leading-edge areas and developing research-trained graduates with an advanced skill set and creative mindset.

The emergence of Ireland as a destination where talented individuals from around the world want to live and to grow their careers has been another vital underpinning of our industrial success. In 2020, almost 40 per cent of new members of Engineers Ireland had been educated outside Ireland or the UK, up from 7 per cent in 2014. Attracting these talented individuals to Ireland, retaining them here and supporting them to grow their careers here must continue to be a priority.

Where does this position us now?

A 2002 paper by academics Ellen Hazelkorn of TU and Colm Murphy of Ulster University, discussing a previous industrial policy decision, quotes a senior civil servant as saying: “We are just opportunistic future grabbers.”

I don’t believe that this is all that we are and I really hope that it is not. There are a number of possible futures on offer right now and opportunism is unlikely to get us to the best one.

It is a time to be strategic. In my experience we are at our strongest when we address matters as a system, bringing all relevant minds to bear on identifying the way forward and I believe that we need such a conversation now. We have an enormous amount on which to build but we need to think, drawing from our considerable expertise and a position that is the envy of many, about the elements that need to be in place to support future success.

To future-proof our talent base we need continuing strength in our systems of higher education and research, funded to a level that allows us to compete

At the top of the list is sustainability. The reliable and sustainable provision of energy, water and materials is an absolute essential. So too are all of the infrastructures, including technical aspects such as data, that support quality of life and make Ireland a country in which people want to live.

We need to support an evolution of our indigenous industries.

We need to identify and target areas of opportunity in which we have a competitive advantage. The layering of digitalisation onto other sectors such as medtech, pharmaceuticals, manufacturing, agrifood and finance represents a great opportunity for Ireland, playing to our strengths.

To future-proof our talent base we need continuing strength in our systems of higher education and research, funded to a level that allows us to compete and prioritising the development of talent.

Prof Orla Feely is president of Engineers Ireland and vice-president for research, innovation and impact at University College Dublin.

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