Essay About Ireland’S Low Corporation Tax And Trade-Dependent Economy

Xbus 6530 – Financial Analysis of Ireland
International Group Project: IrelandDan Herlihy[pic 1][pic 2]October 9, 2015Course XBUS 6530Interpreting the Economic EnvironmentProfessor Richard WobbekindUniversity of Colorado, Executive MBA ProgramEconomic EnvironmentHistorical ContextIreland today is a small, modern, trade-dependent economy that was among the initial group of 12 EU nations that began circulating the euro in January 2002. Following a bleak economic period in the 1970s and 1980s during which time the country was still heavily dependent on agriculture, Ireland’s “Celtic Tiger” era began in the mid-1990s spurred on by high technology industries that moved into the country, transforming it from one of Europe’s poorer countries into one of its wealthiest. The country’s GDP growth averaged 6% from1995-2007. However, no corrective measures were introduced by the government during this time to help control the economy, which eventually led to the downturn during the world financial crisis that began in 2008. Ireland entered into a recession in 2008, seeing average house prices to fall 47% since their 2007 peak. Emergency responses were enacted but Ireland’s budget deficit reached 32.4% of GDP in 2010. By 2013 the government was successful in reducing its budget deficit to 7.2% of GDP. In late 2013, Ireland refinanced a large amount of banking-related debt. In 2014, the economy rapidly picked up and GDP grew by 4.8% and the deficit lowered to 4.2% of GDP. Since 2014, Ireland has seen significant economic growth, commonly referred to as the “Celtic Phoenix”. Ireland’s low corporation tax of 12.5% has been central to encouraging business investment. Loose tax residency requirements made Ireland a common destination for international firms. However, amid growing international pressure, the government has announced it would phase in more stringent tax laws.Current StatusIreland maintains an extremely pro-business environment that has attracted investments by some of the world’s biggest companies over the past decade. Irelands economy today is mostly based on services, with some industrial output and a relatively small amount of agriculture. The country’s largest industries are pharmaceuticals, chemicals, computer hardware and software, food products, beverages and brewing, and medical devices.Ireland’s recent economic downturn has made it more attractive for the companies now moving in.  Nominal wages fell 17% between 2008 and 2011, which helped keep labor costs in check.  Unemployment remains stubbornly high at a recent 12.8%, providing companies with a large labor pool to select from. There are now more than 1,000 overseas companies with a presence in Ireland and they employ 150,000 of the nation’s 1.9 million workers. R&D tax credits allow R&D intensive start ups to claim back tax, even if they are loss-making and thus not liable to pay corporation profits tax. According to World Bank figures, Ireland is ranked 4th in the world for the availability of skilled labor and openness to new ideas; 6th for labor productivity; and 7th for the availability of financial skills.