Dissecting the Investor-Friendly Policies That Have Propelled Ireland’s Economy in the Last 40 Years

Abstract

Ireland’s economic growth in the last 40 years has come to the limelight among scholars and policymakers as it managed to transform its economy from one of the most backward and underdeveloped in Europe in the 1950s into a thriving economic powerhouse that has lured a large number of foreign investors. Academic consensus establishes that an amalgam of factors has contributed to Ireland’s prosperity, including its EU membership, English-speaking educated workforce, governmental stability, and close cultural and commercial ties with the United States. However, many scholars have largely attributed Ireland’s success to its favorable tax regime—with its corporate tax rate at a lower-than-average 12.5 percent. To circumvent the superficiality with which many studies have treated the Irish case, I contribute to this debate by delving into some multinationals’ decisions to incorporate in Ireland. Specifically, I selected the largest foreign Information, Communications and Technology (ICT) and pharmaceutical companies present in Ireland and examined corporate announcements, media reports, and the magnitude of their operations in Ireland to assess the reasons driving these firms’ reallocation decision. My findings suggest that although the institution of a low-tax regime in conjunction with targeted tax incentives was crucial in attracting most of the early foreign movers when Ireland’s economy was comparatively more underdeveloped, other factors seem to have gained prominence in companies’ reallocation calculations as Ireland’s economy took off. More concretely, elements such as Ireland’s highly-skilled workforce, the formation of industry hubs, access to the European market, or governmental consensus on enterprise policy have been critical to most of the companies analyzed in this study. The relevance of these findings and this senior thesis overall has been elevated by the current policy conversations about the institution of a global minimum corporate tax rate, which would set a level playing field on the tax front and urge governments to craft new policies to attract investment.