This is a guest post by Barry O’Dowd
There is an old adage that wisely states: “If you’re explaining, you’re losing.”
Just ask Ireland, a country that has been in the hot seat for months.
Things started to get heated when allegations from U.S. lawmakers sparked a firestorm with far-reaching effects reverberating from the slopes of Silicon Valley to the streets of Dublin. Caught in the crosshairs of congress’s battle with U.S.-based tech companies, Ireland’s tax policies for multinational companies came under close scrutiny, with Ireland suddenly bearing the burden of being dubbed a “tax haven.”
In May, a U.S. Senate committee slammed companies with Irish operations for avoiding billions of dollars in tax by declaring Ireland-based headquarters “stateless” in terms of tax. Since the commencement of this blame-game, Irish officials and companies have attempted to shed light on both sides of the issue. Now it’s time to set the record straight.
Firstly, to get the core point out of the way. Ireland is not a tax haven and never has been a tax haven. Who says that — Ireland? No. The OECD, the global coordinating body on taxation practices, sets four basic tests for qualification, none of which Ireland qualifies under. The OECD has publicly reiterated this point.
Ireland’s 12.5 percent corporate tax rate is undoubtedly an incentive for entrepreneurs to set up shop in the country. The Irish government has made no claims to the contrary and is addressing the issue of “stateless” corporations by revisiting and revising policies that permitted this tax maneuver in the past.
One crucial point that often goes missing in U.S. debates about corporate tax is that any company not “managed and controlled in Ireland’’ is not considered resident in Ireland and is not subject to Irish tax in the first place.
With all that said, it’s time to focus on what’s really pulling companies large and small to the Emerald Isle.
What is Ireland’s real draw?
Ireland is winning the race for foreign direct investment due to reasons far beyond its attractive tax rate. For starters, the median population age is 35, the lowest in the European Union. That means a younger workforce capable of adapting to sector trends.
And they’re educated, too. Ireland has a higher percentage of university graduates than the U.K., U.S., and the Organization for Economic Cooperation and Development (OECD) averages. With Dublin ranked as the best city for human capital in an EIU Benchmarking Competitiveness Report, the talent pool alone is enough to draw companies to Ireland.
Nitro, a U.S.-based provider of document productivity and workflow solutions, is a newcomer to Dublin’s bustling tech scene. For Sam Chandler, founder and chief executives, other countries paled in comparison to Ireland’s competitive edge in talent and development.
“The most important factor for Nitro in our evaluation of potential EMEA HQ locations was access to strong local talent and Ireland was the frontrunner from the outset,” Chandler said.
Similarly, a month before Nitro’s announcement, survey technology platform Qualtrics set up its EMEA headquarters in Dublin. Chief executive Ryan Smith cites Ireland’s penchant for harnessing talent as a major pull to the country’s capitol.
“We selected Dublin because it’s home to several top colleges and universities, offering us a significant base from which to cull top talent” Smith said. “This is one of the primary reasons that we based our international headquarters here.”
But let’s just say that the access to a top-notch skilled workforce isn’t a factor for a company deciding where to set up a European headquarters.
Ireland is ahead of the curve
Ireland provides U.S. companies a home base with both access to the European market and cultural compatibility. Since 2006, the Government Strategy for Science Technology and Innovation has invested €8 billion to research and development initiatives. This robust R&D environment emphasizes Ireland’s dedication to growth. Companies that have invested, such as Google and Facebook, are committed to staying operational in the country because of its knack for staying a leap ahead. The corporate tax rate is lovely. The rapid growth experienced because of raw talent and a supportive government is even lovelier.
With today’s rapid globalization, accessing the 500 million consumers in Europe is essential for an expanding business. AdRoll, a U.S.-based online advertising platform, is another company that recently set up European headquarters in Dublin because of its barrier-free access to the European market.
“We assessed a number of options, and Dublin stood out for its exceptional, multi-lingual talent and reputation for innovation,” Suresh Khanna, SVP of Sales and Operations, said. “Fueled by over 600 percent annual growth and strong organic demand in Europe, we knew building a large, high performing team in Europe was the best way to serve our customers.”
Given all this, it’s simply not fair to claim Ireland attracts foreign direct investment principally on its competitive corporate tax rate. While it may be a factor, citing it as the main reason undermines the sheer talent and technology the country has invested in developing for over two decades. Ignoring the bigger picture of Ireland’s assets skews the argument and keeps a storm cloud hovering over Ireland’s burgeoning economy. It’s already cloudy enough here, guys.
Barry O’Dowd is the vice president of emerging businesses at IDA Ireland @idaireland, an investment agency.