The latest figures from the OECD show, once again, Ireland at the top of the list of the most productive countries on earth.
With each worker contributing an average of £93.7 per hour to the value of the economy, this puts them at nearly twice the OECD average.
But how are they achieving this?
Multinationals are the Secret of Ireland’s Success
The simple reason for Ireland’s success is the predominance of multinationals in the Emerald Isle.
Lured by one of the most attractive corporate tax rates in the world, Ireland is home to more than 1,000 FDI giants. Companies such as Google, HP, Apple, IBM, Facebook employ tens of thousands and have bought over 54 billion in revenue to the island.
Since the 1990s, Ireland has more than doubled its labour productivity, while countries such as the UK, Germany and France have failed to reverse declining levels.
Could Joe Biden’s Tax Changes End Ireland’s Competitive Advantage?
This month’s announcement by the Biden administration, that they will be pushing for a global minimum corporate tax rate, could have drastic implications for Ireland’s economy.
“We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom,” said US Treasury Secretary Janet Yellen.
Biden’s plan means that if a company paid tax at the lower Irish rate, then the US (or other countries) could top up that company’s tax within their jurisdiction to bring it to the global minimum. Yellen hinted that the figure of 21% is what they have in mind.
For the Biden administration, this would be a way of preventing tax revenues leaking to other countries, and a means of injecting $2trn into American’s economy.
Irish economic pundit John Wheeland commented that Ireland “had got away with it for quite some time” and that the significance of Biden’s bid for a global 21% minimum rate should not be understated.
With Ireland’s corporation tax receipts rising from about €4bn (£3.5bn) in 2013 to around €12bn (£10.5bn) in 2020, the country may face a starkly different economic future if Biden’s plan succeeds.