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Ireland Inc. Has Agility, Flexibility To Be Modern, Competitiveby Mary Harney, TD On a challenging and changing global environment the Irish economy has continued to experience growth. In order to remain competitive Ireland Inc, as an open economy, is constantly demonstrating its flexibility and agility to adapt with the aim of becoming a modern, competitive enterprise economy that would be based on quality employment, social inclusion and enhanced working and living standards. Ireland Inc is continually developing its strategy to be a world-class economy through a partnership approach by the government and the main players in the business world, which include the investment and development agencies (IDA Ireland for FDI and Enterprise Ireland for indigenous Irish companies), industry, education institutions, local authorities, regional development agencies (such as Shannon Development) and trade unions. This successful approach continually produces major initiatives that enable Ireland to forge ahead as a confident and sophisticated player on the global stage. Many companies have been attracted to Ireland by the promise of Ireland's unique investment environment, namely:
The vigor and dynamism of Irish enterprise is a major contributor to IrelandÕs economic growth, and Ireland now has a vibrant enterprise culture. The economy clearly benefits from a strong and expanding locally controlled business sector that rewards those who work in it and the community at large. Ireland's defining competitive advantage for the future lies in its education, skills research and innovation and the development of world-class research and development capability. I believe that you should experience these first hand and work in partnership with one of Europe's fastest growing and most business-friendly economies. Irish Economy Continues to Sparkle The Irish economy continues to be one of the leading economic growth performers in the industrialized world. In the five years leading to 2002, Ireland's average annual growth was more than three times that of European Union and Organization for Economic Cooperation and Development (OECD) countries, and one of the highest anywhere in the world. Even in the context of the present global economic slowdown, IrelandÕs projected growth over the next few years will still be well ahead of other OECD countries, and this will maintain IrelandÕs position as one of the world's growth leaders. Over the past decade, Ireland's surging economy and unprecedented growth have completed a dramatic transformation of the country that has attracted considerable international media coverage. Just over a generation ago, Ireland was a comparatively poor agrarian country with little industry, low growth and high unemployment and emigration. Now, it is a high technology, export-led industrial economy. In the 1990s, Irish industry created 370,000 new jobs. The population, at nearly four million, is at its highest in over a century, boosted by thousands of returning emigrants, many with valuable business and technology skills. Ireland is now a trading nation with an increasingly global perspective. The most recent Globalization Index study, compiled by international consultants A.T. Kearney, names Ireland as the most globalized country in the world, and comments that Ireland has the highest degree of economic integration among the developed economies. The Irish economy is driven by strong export growth. An estimated 85 percent of Irish manufacturing output is exported, making Ireland, on a per capita basis, one of the world's top three merchandise exporters and software exporters. EU membership was a decisive milestone in opening Ireland to the global marketplace and diversifying its international trade. There has been a huge growth in Irish sales to the United States as well as throughout Europe, the Asia Pacific region and other global markets. The creation of a new entrepreneurial culture in Ireland is one of the most striking aspects of the country's economic success story. Over the past 10 years, Irish enterprise has been playing an increasingly important role in Ireland's economic, industrial and export development. Foreign investment laid the foundations of a sustainable industrial structure in Ireland. No less important has been the creation, from virtually nothing, of a thriving base of world class, high technology, Irish-owned companies. It is this vibrant local enterprise that offers the best indication that Ireland will continue to play an important role in global trade for the foreseeable future. Ireland's young, innovative, high tech companies have been successful in competitive world markets because they offer high quality products and business solutions that are tailored to specific customer requirements. They have developed a high diversity in products, services and end user markets, and continue to develop a stream of innovative products. Traditionally, Ireland had a reputation for quality consumer goods such as food and drinks, fashion and giftware. But, in addition, we now have highly successful Irish exporting sectors that have come into existence only in the past 25 years. There are three specific high technology sectors where Irish companies have been building significant global markets. Ireland is one of the world's top three producers and exporters of software. Irish software is a dynamic growth industry delivering high quality, leading edge products and services to the global marketplace. Irish-owned software companies have become world leaders in banking, telecoms, software development tools and digital media. Software is perhaps the most outstanding success story of Ireland's economy. E-Learning is the fastest-growing sector of the Irish-owned software industry and Ireland is recognized as a small but fastgrowing global leader in the e-learning business, with world class technologies and leading edge niche products that are competing head-to-head successfully with the big players. Ireland has a substantial number of internationally recognized Irish companies, and a number of significant international players have also been attracted to Ireland. This has resulted in the development of a strong e-learning skills base in Ireland and an international reputation for Ireland as a leader in this sector. Telecommunications is the third of Ireland's major high tech success stories. Ireland has invested heavily in developing one of the most advanced and sophisticated digital telecommunications networks in the world, and Irish companies are significant niche players in the global telecommunications industry. Trade liberalization and the revolution in information technology have created a global marketplace where business transcends traditional barriers. Today's successful Irish companies think in terms of global customers and global opportunities, and the most effective way to achieve sales growth is through the creation of strategic alliances among exportled companies. There are already a number of such alliances between Irish and American companies and there is scope for more linkages through investment, technology transfer, joint ventures, acquisitions, and other forms of joint marketing and trade relationships. The partnership concept has particular relevance for U.S. companies who are doing business or planning expansion in the EU, particularly in the industrial and technology sectors, but do not necessarily want to establish a European manufacturing plant at this stage. Ireland is the ideal Gateway to Europe. Ireland's active development of markets throughout the EU and our increased access to the fast growing economies of middle Europe such as Hungary, Poland and the other incoming members of the EU, makes it an ideal partner for joint ventures with companies in other parts of the world. Ireland has many companies, of proven excellence and performance, with the market access, contact networks and local knowledge to partner U.S. companies in Europe. Enterprise Ireland is the trade and technology board of the Irish government, and it is actively supporting Irish companies through a range of initiatives to build market awareness and accelerate sales growth across the globe. Enterprise Ireland works with Irish companies and business interests around the world to develop partnership opportunities for both. In the IT and high technologies sectors, in particular, Ireland has much to offer. Enterprise Ireland has a great deal of experience in working with Irish companies and potential international partners to develop strategic alliances and would be delighted to discuss opportunities with U.S. companies. Software/Medical Industry According to the OECD Information Technology Outlook 2000, Ireland is the largest exporter of software goods in the world. The United States and Ireland are by far the main exporting countries, accounting for almost two-thirds of OECD exports of software goods in 1998. There are currently 840 software companies employing over 30,000 people in Ireland. The top 10 independent software companies in the world have significant operations here. More than 140 overseas software companies employ 15,000 people and use their operations in Ireland to carry out a broad range of activities, including core software development, e-learning, product customization, software testing and fulfillment. Software development has a range of applications in mobile communications, electronics, engineering, enterprise resource planning, database management, B2B solutions software, banking, insurance solutions and Internet security systems. Consultancy service and systems integration companies use Ireland as a base to support international business clients in design development, customization and implementation of total-business systems and products. An increasing number of companies are also providing technical support to customers worldwide via toll-free support centers located here. A number of software companies in Ireland, some of which originated as small Irish start-up companies, are today leading their markets wit innovative middleware and Internet solutions. INDUSTRY PROFILE- MEDICAL DEVICES Ireland is home to 13 of the world's top 20 medical device companies and is the ideal location to operate from. The leading medical device companies have chosen Ireland as a base for developing, manufacturing and marketing a diverse range of products from disposable plastic and wound care products to precision metal implants including pacemakers to microelectronic devices, orthopaedic implants, contact lenses and stents. Companies such as Boston Scientific, Medtronic, Abbott, Guidant and Tyco Healthcare have already chosen Ireland as a location to service their worldwide markets from. There are 83 companies in the IDA Healthcare portfolio employing over 16,400 people, making it one of the largest industry sectors. Sales in these companies exceed four billion euros annually. In addition, over half of these companies are involved in research and development with a number of companies having dedicated R&D centers that specialize in particular areas of expertise while some of the other medical device companies in the portfolio have established business support activities such as shared service centers, e-business functions and supply chain management centers. The establishment of a Technology Foresight Fund of 711 million by the Irish government, the formation of Science Foundation Ireland and dedicated research centers such as the National Center for Biomedical Engineering Science at Galway are all designed to raise the research base in Ireland to new heights of internationally recognized excellence. With low corporation tax, the availability of technical and managerial talent, and sophistication of the local sub-supply, sub-contract and services industry, Ireland is the ideal location for the medical device industry with three out of every four greenfield medical devices who locate in Europe choosing Ireland. E-BUSINESS Successful electronic commerce requires modern, cost-effective broadband communications, a positive economic, political and taxation environment and the availability of skilled and enthusiastic people. Ireland is unique in offering this special combination. CORPORATION TAX Ireland offers a unique tax incentiveÑa 10 percent corporate tax rate was in place until December 31, 2002, for manufacturing and qualifying services. From January 1, 2003, a standard corporation tax rate of 12.5 percent will apply to all trading profits in all sectors, including manufacturing and international services. SKILLED STAFF One of the main reasons why so many hightech companies choose to locate in Ireland is the unique workforce. Ireland has the youngest population in Europe with 40 percent under the age of 25. They benefit from a quality education system from early schooling through to university level. THE ONLY ENGLISH-SPEAKING MEMBER OF EMU As a founding member of EMU, and the only English-speaking member, Ireland offers significant advantages to companies operating here. These include the elimination of exchange rate risks and transaction costs, consistently low interest rates and a stable economic environment. PRO-ACTIVE E-BUSINESS LEGISLATION Ensuring that electronic commerce can happen in a secure, trusted and safe environment is a key aim of the Irish government. IrelandÕs approach to regulation of electronic commerce activities is going to be light, flexible and supportive of business. The Electronic Commerce Bill dealing with electronic signatures and certification authorities was signed into law on July 10, 2000, by President Mary McAleese using a digital signature, which will have full recognition under Irish law. Using e-security technology from Baltimore Technologies, the president was issued a unique signing key and digital certificate. This legislation creates equivalence of treatment between electronic documents- contracts, signatures, seals-and their paper-based counterparts under Irish law. Ireland has now put in place a clear, flexible and user-friendly piece of e-commerce legislation. The e-Commerce Act is designed to be as technology neutral and, insofar, as is practicable, to reasonably stand the test of time and technological progress. The aim is to keep it as simple, streamlined and as easy to follow as possible in order to ensure that it is enterprise friendly. The Act allows for the introduction and maintenance of a voluntary accreditation scheme and a supervision scheme for the issuers of electronic signatures. To give confidence to e-commerce activities, certain offenses related to the abuse of electronic signatures are also created under the Act. The Act provides that while investigating officers are entitled to plain text versions of documents when probing offenses under the Act, they are not in any circumstances entitled to the private encryption keys of individuals. The Tax Picture Ireland provides a very favorable tax environment to encourage business development and sustain investment. Ireland offers a unique tax incentive into the 21st century. From Jan. 1, 2003, a corporation tax rate of 12.5 percent applies to Irish trading profits in all sectors, including manufacturing and international services. In addition the 10 percent rate will still apply to existing qualifying “manufacturing” trades until December 31, 2010, provided the trade was a qualifying trade before July 23, 1998. CORPORATION TAX The standard rate of corporation tax in Ireland for trading profits is 12.5 percent. A rate of 25 percent applies to non-trading (passive) income.Whether a trade is being carried on or not needs to be determined in the light of Ireland’s tax legislation and relevant case law.However, as a rule of thumb there should be sufficient substance to the activity being carried on in Ireland in order to be certain of trading status. Profits from qualifying “manufacturing” activities are subject to a reduced corporation tax rate of 10 percent until Dec. 31. 2010, provided the qualifying activity commenced, or was approved for grant aid, before July 23, 1998. EXPORT VAT EXEMPTION Exports are zero rated for VAT, except those to unregistered persons in the EU. Companies that export 75 percent or more of their output can apply to the Revenue Commissioners for authorization to receive almost all of their goods and services from Irish and foreign suppliers free from any VAT charge. This reduces administration and the need to get a refund of VAT. CUSTOMS AND EXCISE DUTIES Ireland is a member of the EU. All border controls between member countries have been eliminated, to create the single European market, which allows duty free importation of goods from other EU countries. Goods imported from outside the EU are subject to customs duty at the appropriate rate specified by the EU’s Common Customs Tariff. The rate of duty is based on the international Harmonized System (HS). The EU has preferential tariff agreements with certain countries and country groupings which will result in the rates being reduced or eliminated. Excise duty is chargeable on a limited number of goods including petrol, diesel, LPG, beer, spirits, wine, tobacco products and motor vehicles. Excise tax rates vary depending on the goods and are payable in addition to any customs duties payable. Where it is a finished product for sale, no duties are payable if the goods are re-exported outside the EU.Where the goods are released into the EU, the appropriate duties are payable. Special arrangements operate to allow movement of dutiable goods within the EU, with the duty being eventually paid in the country of consumption. CAPITAL GAINS TAX Profits arising from the disposal of assets, adjusted for inflation up to Dec. 31, 2002, are subject to capital gains tax. The standard rate of capital gains tax is 20 percent. Trading losses may be offset on a value basis against capital gains for the current or previous year. Capital assets may be transferred between Irish resident group companies without liability for tax on the capital gain. STAMP DUTY Stamp duty is payable on the transfer of land and buildings, the lease of property as well as on certain legal instruments. Rates vary between 1 percent and 9 percent except on leases of greater than 100 years where the rate is at 12 percent. Transfers between companies with a 90 percent relationship are exempt from stamp duty. Regional OverviewWhy Blue Chip companies favor Shannon, Ireland For the past 40 years, leading companies from all parts of the world have looked on Shannon, Ireland, as a favored investment location. This part of Ireland is now home to some of the world’s leading edge companies with a combined export level of over $2 billion. Shannon has proven advantages in many sectors: software; medical devices; aerospace; engineering; information and communications technologies; financial and shared services; and customer contact centers. Companies such as Intel, RSA Security, Enterasys Networks, Veritas Software, Avocent,Mentor Graphics, Ingersoll Rand,Molex, GE Capital, AON Insurance, Becton Dickinson, Bristol Myers Squibb, Hamilton Sundstrand and Tyco have all chosen Shannon as a location from which to service customers in Europe and beyond. In doing so, these firms enjoy some unique benefits including:
Add to these the fact that Ireland, according to the U.S. Department of Commerce, has consistently offered U.S. investors one of the highest rates of return on their investment—currently 24 percent—and you can see what makes Shannon an attractive solution for U.S. companies seeking a base in Europe. A further feature of Shannon’s success lies in the fact that the Irish government agency responsible for its development— Shannon Development—is a strong believer in continuous re-invention and investment and believes that to remain competitive the location must be kept up to date and relevant to the needs of today’s investor. “Companies choose Shannon for firm-specific reasons”, according to Patrick Clune, Shannon Development’s VP of Business Development, based in New York, “but high on their criteria checklist are low corporation tax rates, the availability of technical and managerial talent, and the sophistication of the local sub-supply and sub-contract services sector. One of the reasons why so many companies choose Shannon is because of the unique workforce— Ireland has the youngest population in Europe with over 40 percent under the age of 25 years. They are highly educated and highly motivated and overseas investors consider the quality and the ‘can do’ flexible attitude of Irish people to be two of the country’s greatest advantages. The fact that Shannon also offers investors a stable, profitable, English-speaking base from which to service the growing European market and beyond is an added bonus.” “Easy access for goods in and out of Shannon via air, road and sea is a given today. Shannon has a major international airport less than three hours from most major European capitals. Upgraded road and sea routes have brought Europe within easy access, while investment in broadband infrastructure has favorably positioned Shannon as a leading European location for digital business,” Clune concluded. |
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