Final year Law and French student Katie McCarthy looks at Ireland’s changing views on MNCs and what this means for future business.

2021 has brought many unexpected things, one of them being the change in Ireland’s remarkable softness on large corporations. Almost 1,000 multinational companies have chosen Ireland as their strategic European base due to our ‘pro-business environment’ and ‘attractive taxation rates.’ Ireland has previously had one of the lowest corporation tax rates in Europe at 12.5%. Companies have also been able to avail of a 25% tax credit against research and development costs. However, recent developments would suggest that the times are indeed a-changin.’ 

While some heed Ireland’s status as a quasi ‘tax haven’ as encouraging entrepreneurial spirit, injecting vitality into the economy and providing employment, others hold a more negative perspective. Speaking earlier this year, Nobel Prize-winning economist Joseph Stiglitz, went as far as to accuse Ireland of ‘stealing revenues’ from other countries.

One such example of this is the Irish Data Protection Commission (‘the DPC’) imposing a significant €225m fine on WhatsApp for data protection breaches. This fine represented a more than four-fold increase in the €30-50 million fine that had been proposed in a draft decision issued by the DPC in December 2020. This was surprising given that, in its 2021 report on the enforcement capacity of data protection authorities, senior fellow at the Irish Council for Civil Liberties, Johnny Ryan stated that Ireland was the ‘worst bottleneck’ for enforcement of the EU’s General Data Protection Regulation (GDPR). Unsurprisingly, WhatsApp was less than pleased and is appealing the decision.

Ireland’s lessening favour for the large corporation was all the more evident in the raising of the corporate tax rate to 15%. While this is not a gargantuan increase, it is surprising given that our low corporate tax rate was previously clung to for dear life. That said, these reforms only apply to firms that have a turnover of €750 million or more. This still carries significance, however, as this applies to approximately 1200 companies currently in Ireland. The Department of Finance estimates around €2bn in lost tax income in the short to medium term. Also, a softening of Ireland’s decades-long tax advantage is sure to show up deficiencies elsewhere, as noted by Reuters correspondent Padraic Halpin. These deficiencies may include but are not limited to, the lack of affordable housing and the high cost of living.

Furthermore,  Facebook has recently given permission to some staff previously based in Ireland prior to the pandemic to locate themselves permanently in a number of other European countries, which may also be a matter of concern for Ireland. It seems that being based in Ireland soon won’t be all it was cracked up to be. If other MNCs follow Facebook’s lead, the impact will be hard to ignore. 

What does all of this mean? Will these changes give rise to Ireland becoming a more hostile place for MNCs and lead to a ‘corporate exodus’, or are these supposed ‘crackdowns’ simply for show with no teeth behind them? Could this sea-change in the Irish approach make it harder to win multinational investment into the future? Are we right to take away a chunk of Ireland’s ‘competitive edge’ when it comes to attracting inward investment? Indeed, Business Editor at RTE, Will Goodbody has pointed out that, if workers can be sourced from all over the world and the corporation tax rate is no longer an advantage, Ireland could face the prospect in which ‘a number of its trump cards are gone.’ It will be interesting to see if Ireland is truly committed to ‘change for good’ or if this is merely a case of empty virtue signalling.

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