Ladies and Gentlemen of the American Chamber of Commerce: I am delighted to be here today to join in your Thanksgiving lunch as you celebrate your national holiday here in Ireland. In the spirit of the holiday I would like to say that I am thankful for the long-standing friendship between the United States and Ireland and the close economic links that exist between our two nations. This is a relationship that is going from strength to strength and long may it continue.
I should firstly extend the congratulations of the Irish people to President Barack Obama on his re-election, and to say that we in Government look forward to working with our neighbours across the Atlantic as we both look to return to normal economic activity. The visit of President Obama to Ireland in 2011 flowed across our screen during the Election coverage and with a bit of luck and a lot of work on both sides of the Atlantic he might find the time to make the trip south from Fermanagh next year.
On the domestic front, I am finalising next month’s budget and this necessitates difficult choices to deliver our targets. In addition, we will also focus on supporting the economic recovery. FDI is so important to Ireland and our focus in Government remains on bringing jobs and investment to Ireland. So you can be confident that the changes we will introduce will only serve to enhance Ireland as a destination for Foreign Direct Investment, and to retain the 12.5% corporation tax rate.
In the US, after a hard-fought election, there will be a hard-fought debate on some significant policy areas – including the so-called ‘fiscal cliff’ and tax reform. Insofar as this debate takes in questions of international corporate tax reform, it is undoubtedly of special interest to you and to us in Ireland.
Our concern is always to ensure that we support the reputation of Ireland as a base for substantial investment into Europe and the wider region. The success of US companies here, evidenced by the continued investment of reinvestment complements and supports your growth at home in the US.
My Department works very closely with our Embassy in Washington and the IDA in ensuring that our perspective gets a hearing in the discussions in Congress and in the Administration, especially in relation to the link between a competitive tax rate and real substance being based in Ireland. We continue to have an open door for you, to hear your thoughts and concerns in terms of how any proposals being advanced might affect your business here and in Europe.
We do not underestimate the importance of our relationship and the strong business links that have developed between Ireland and the US over the past number of years. The result of continued US investment in Ireland is evident in IDA job creation announcements. 2011 was a fantastic year for investment and so far this year, over 6,000 positions have been created as a result of US companies making substantial investments in Ireland. These include many companies with familiar names already based here expanding their operations:
Apple, the world’s highest valued company, is expanding its European HQ in Cork with 500 new staff.
Mylan, the pharmaceuticals manufacturer, is growing its R&D capabilities in Ireland with an investment of €380 million and 500 jobs.
Paypal is adding 1000 jobs in Dundalk
Northern Trust is more than doubling its workforce in Limerick with an extra 400 positions
EA Games, is increasing its operations in Galway by adding 300 new jobs.
What is most welcome is the geographical spread of these investments, many by existing companies, and this is testament to the strength of our infrastructure, our universities and college graduates and our track record. I had the pleasure of attending the Northern Trust jobs announcement in Limerick and to hear first-hand the high-esteem in which our Graduates are held and of the strong relationships between the company and the University and Limerick and the Limerick Institute of Technology. This is a good indicator of why US firms continue to invest in Ireland, and highlights that Ireland has more to offer beyond our 12.5% tax rate.
Indeed, we have more to offer by way of tax beyond our competitive tax rate, including our R&D tax credit and Intellectual Property regime. Despite the many other strings to our bow, however, we do not underestimate the importance of our competitive tax rate: this is critical to supporting our economic recovery and employment growth. I know it gives continued comfort to everyone in this room to hear me reiterate our robust commitment to the retention of the 12.5% rate of corporation tax.
We consider that the matter is also well settled at the EU level and that there is a real recognition that the 12.5% is a vital component of our recovery, and is embedded in our ability to exit the Programme on track at the end of 2013.
Recent media reports have referred to the ways that companies structure their international tax affairs to minimise their tax costs. The ability of companies to lower their effective rate of tax using international structures reflects the global context in which Ireland, and indeed all countries operate.
The tax system in Ireland has a positive international reputation based on transparency and the fact that it is applied equally and openly to all corporate taxpayers. Ireland has an extensive tax treaty network which confirms our international standing. The January 2011 Global Forum Peer Review Report on Ireland’s legal and regulatory framework for transparency and exchange of information found that we have an effective system for the exchange of information in tax matters and is fully compliant with OECD standards. Ireland does not support harmful tax competition. We continue to participate fully in the EU Code of Conduct Group, which addresses harmful tax competition, and in the OECD Forum on Harmful Tax Practices.
Our job in Government is to bring investment and jobs to Ireland, and Ireland has used the tax code and in particular our competitive corporation tax system to do so for over 50 years. What companies do outside of Ireland is beyond the scope of the Irish tax system. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to taxation in Ireland alone, but we continue to work with international bodies to ensure fair play.
We are determined to emerge from the EU/IMF Programme at the end of 2013 and to return to sustained market access next year. We have a plan in place for how this will be achieved and our actions in 2013 will prove central for its successful execution.
The IMF has stated that support from our international partners will play an important part in the success of our exit from the Programme, and America is one such partner.
Again, given that it is thanksgiving, this is a welcome opportunity to express my gratitude to the members of the American Chamber of Commerce in Ireland for your unwavering support along our road to recovery both to date and well into the future. US FDI investment stock in Ireland has continued to grow post-2007, despite the financial crisis, and we appreciate your continued belief and confidence that Ireland is and remains a safe place to invest. Indeed, US FDI in Ireland last year totaled $30.5 billion which is the second highest amount on record and I am comforted by the high esteem that the US holds Ireland, indeed the feeling is mutual.
As you will be aware exports have been driving the recovery in Ireland. If other components of the economy had remained stable in 2011, GDP would have grown by 6% on the back of export growth alone. With the majority of Irish exports accounted for by US companies, we can see that US firms contributed some three percentage points to Irish GDP growth last year.
We are working closely with the Troika and with our partners in Europe to break the vicious circle between banks and sovereigns. This commitment has been vital in allowing the State and the commercial sector to begin accessing international financial markets independent of each other. We are also working to find a new arrangement with the ECB to provide funding certainty to IBRC (what was Anglo Irish Bank).
We remain confident that our successful exit from the EU/IMF programme at the end of 2013 will show the positive dynamic that can be achieved by a programme country and set a positive example for our colleagues in Europe.
Irish Economic Developments
Our intention to exit the Programme is based on more than just an aspiration, as last year saw a return to economic growth following three years of successive decline in GDP, marking a positive step on the road to recovery. The Irish economy continued to grow in the first half of this year on the back of a strong net export performance, and we expect a second full year of growth in 2012. Given the challenging international environment in which we are operating and the fiscal consolidation that we are going through, this performance is testament to the flexibility and adaptability of our economy.
US-owned firms have played an important part in this recovery, and I want to once again acknowledge this. Services exports were up 9 per cent year-on-year in second quarter due in large part to the growth in US firms here in Ireland. Our manufacturing exports are also holding up well given challenging global developments and the contribution from US- owned companies is considerable.
My Department set out its revised economic forecasts last week in the Medium-Term Fiscal Statement, and we expect economic growth to continue in 2013, albeit at a lower-than-previously-anticipated rate of expansion due to strong external headwinds. This is consistent with recent downward revisions by many forecasters to the growth outlook in many of Ireland’s main trading partners and the re-emergence of recession in the euro area.
Looking beyond immediate developments, there are genuine grounds for optimism regarding the medium-term prospects for the Irish economy. Our underlying strengths have not disappeared with the crisis – we have retained and strengthened many of the core qualities that underpinned the sustainable, export-led growth that prevailed during the 1990s. For instance:
·We have a well-educated labour force;
·Our tax regime rewards work and enterprise and as such is growth-friendly. While the necessary adjustments on the revenue side are being made, a pro-business environment has been to the forefront of Government policy.
·Exports are now in excess of pre-crisis levels. For the first time Ireland is now a net exporter of services due in no small part by investment in US IT and business services firms over the last number of years.
·We have a vibrant high-technology export base with critical mass in key sectors. Three of the world’s top 5 gaming companies are here and 8 of the world’s top 10 technology companies are here;
·We have made substantial improvements to our public infrastructure, which is in many cases as good as that in the rest of Europe
These are the reasons why firms such as your own, both large and small, are continuing to invest in Ireland. Last year was a record for new FDI investment, and the pipeline remains healthy with 80 foreign direct investment projects secured so far this year. This confirms that Ireland remains the destination of choice for many globally-mobile, high-technology firms seeking a presence in the EU.
Positive for Ireland in 2013
The Chamber’s recent report on The Irish-US Economic Relationship reveals the full depth and extent how intertwined our economies are. Key to this economic relationship is a fundamentally sound personal relationship between our people.
This friendship was evident this year as Ireland welcomed some 35,000 American visitors to Dublin in September for the American football match between Notre-Dame and the US Navy. [I have been told that Notre-Dame has gone on to have a fantastic season and currently sit undefeated and as top seeded team. Perhaps Notre-Dame should consider opening each season in Dublin! There is no doubt that other teams will be looking at Notre-Dames season and trying to replicate the success – including the trip to Dublin - and I am sure that an exclusive and long term deal could be agreed for the “fighting Irish.” ]
This event was a resounding success, and showed the high regard people the Irish people have for all things American and the positives that Ireland has to offer to visitors. I look forward to these friendships being developed even further and family links being further buoyed following The Gathering 2013. This massive tourism initiative has a dual purpose to develop and nourish our relationship with the Irish Diaspora, and to give an added boost to our economy. We look forward to welcoming people home in 2013, in particular, family and friends from the US.
Next year Ireland will take up the Presidency of the European Union in January. We in Government see this as an opportunity to showcase the Irish spirit of recovery and to prove that we are still able to take the lead on international matters. The European agenda is of course urgent and crowded with the issues that hit the headlines every week, as well as significant pieces of European legislation that get less public attention but are important and demanding. During those six months, we want to emphasise particularly the growth and jobs agenda.
I would also see potential in the EU Presidency to advance the transatlantic agenda. We are eager to do all we can build on the work of the EU-US High Level Working Group on Jobs and Growth which is due to report by the end of the year. There is real potential for us to come together to further ease the flow of goods and services between Europe and the US, and we see Ireland as the gateway to this happening.
I believe all these activities for 2013 highlight that we are returning to some form of normality in Ireland following some painful fiscal adjustments domestically.
Our tentative return to economic growth, The Gathering, the Presidency of the EU Council, and the fact that Ireland is being lauded as an example of a successful IMF programme all show that we are back on track. The US-Ireland relationship continues to be a key feature of our ability to stay on course.
And so, in the Thanksgiving tradition, I would like conclude by giving thanks: to the close links between the US and Ireland and to your continued support into 2013 and beyond.
Department of Finance
Upper Merrion Street