Brexit could provide a boost to our FDI.
The recent layoffs in Intel and the fact that Brexit, if it happens, could lead to a bonanza in diverted multinational investment from Britain to Ireland, put this country’s relationship with global companies back in the spotlight.
In the case of the layoffs at Intel, forced due to a sharper than anticipated fall in PC sales in the US, the losses underscore the less than satisfactory arrangement we have with the companies.
We provide workers and tax breaks, and they provide wages and opportunities. But wages are income, not wealth. Income is transitory; wealth is permanent. The real prize for a country such as Ireland which facilitates massive wealth generation for the multinationals is to get a share of their permanent wealth rather than transitory income.
Regarding Brexit, Britain leaving the EU could deliver the greatest foreign investment kick to Ireland in decades.
You wouldn’t think that opportunity exists, listening to the chorus of Official Ireland baying for Britain to remain.
But any modicum of honest analysis would suggest a clear, logical counter-narrative.
Obviously, the complexion of the British economy would change initially as uncertainty over tax and trade arrangements diverts foreign direct investment away from Britain. But where would that diverted FDI go? To Ireland, of course. Where else?
The British economy is 15 times bigger than Ireland’s, so we only need a small amount of the diverted investment to make a massive difference to our growth prospects. Why not take this opportunity and the unfortunate, but hopefully temporary, news from Intel, to signal a new relationship with the multinationals?
This new relationship would be instantly attractive to increased investment and would allow us to garner wealth, not simply income.
One of the ways to become real partners with the multinationals is to become shareholders, rather than simply a production location with favourable taxes.
Imagine taking shares as well as corporation tax revenue from them. At the moment the world is moving toward closing tax loopholes, which will culminate in firms having to pay the headline rate of tax here.
But rather than taking this money in tax, to be frittered away in the next political auction, we could take shares.
By taking shares in multinationals, we could create an Irish sovereign wealth fund that is linked to the share performances of some of the best-governed companies in the world, plugged into the world economy like no other and providing huge wealth for future generations.
So how would something like this work and why would it be attractive to multinationals diverting from Britain?
Well, they always say the first way to persuade someone to do something for you is to speak their language.
Most quoted multinationals already reward their employees with share options and shares, so why not simply extend this to our total relationship with these companies – outfits such as Microsoft, Apple, Facebook, Google and the like?
In 2012, US multinationals made $100 billion profit here on which they are supposed to pay 12.5 per cent tax, or $12.5 billion. But in fact they only paid $4 billion. So they ought to pay $8.5 billion more than they do.
This is the type of money any tax equalisation measures from the EU will come after – and in fact it would wipe out the annual Irish budget deficit a few times over.
But of course, the multinationals may react to any tightening in the tax take as the signal to move. After all, most multinationals here are service businesses, and these are easier to move than manufacturing businesses.
Why not encourage the multinationals to pay the difference between what they actually pay ($4 billion) and what they ‘ought’ to pay ($12.5 billion) in shares? We could pledge these shares for future generations of Irish people. The figures are significant – $8.5 billion is a lot of money, and it grows. Shares are permanent wealth, whereas taxes are more transitory income, like wages.
In recent years, financial wealth has grown much more quickly than income. Imagine an Irish sovereign wealth fund comprising the shares of these companies, compounding at these rates. This is the prize. And why would the multinationals go for it? Because giving shares or share options is much cheaper for the company than giving cash. It always is.
And they are used to operating in this way. What multinational treasurer would not look at this option?
By matching our interests with the stakeholders and shareholders of the companies that we have operating here, we revolutionise the game. We would be jumping together and both have skin in the game. We would be solving the multinationals’ problem, helping them be globally tax-compliant, capitalising on Brexit and reducing the risk that they head off to another jurisdiction.
We would have a new story to tell, and no better people to go out and tell it. Brexit is an opportunity, not a threat. Can’t we see that?
Again,a clever and innovative way of looking at silver linings…but again you’re not taking into account the Gombeen men who run the place, and the idiots who repeatedly vote for them…
Any Wealth Investment Regime such as you’ve described would require foresight,genuine concern for the country and a Government not held in thrall by Banksters and Corrupt Businessmen. Good Luck with that…
What an excellent idea.
There is a risk with piling more eggs into the basket on this one though. Any wealth created should be diverted to other potential opportunities, like what the Scandinavians do with their oil money.
And imagine what twiddle dee and twiddle dum might do with a Sovereign Wealth Fund.
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I disagree. In fact I would call the opposite perspective. Westminster gets more sovereignty. Britain becomes a far more nimble and serious competitor than presently. Because Britain means business. And Britain will do more to attract inward investment, and drive up productivity. The idiots in Brussels (including that buffoon responsible for decisions to reverse planning inquiries, and who oversaw the Irish Water super quango – designed to fail – expensively ] are instigating disaster. Ireland is now about to put Mary Mitchel O’Connor in charge of employment policy. Promoted on the basis of inadequacy and lack of her being a… Read more »
The real problem here is that the Eurozone Banking system is a Ponzi scheme with extreme valuations, and a dangerous insolvency problem. And the last thing that it needs is Britain declaring that it does not really have any more confidence in a house of cards. In fact that is the ultimate crime. You can be sceptical. But you cannot declare it. Because that might result in serious reform of the system. And as we know, the EU, as a policy making monopoly does not like alternative viewpoints. Whether it is Greek Finance Ministers, or the Irish electorate, or Icelanders… Read more »
Very good idea David.
We would just need to ring fence the fund so it wouldn’t used for political advantage by any sitting government.
About one third of MNC staff are Irish. The more FDI Ireland receives the greater the amount spent by govt on health, education and housing. Explains our insane nat debt and crowding out of domestic businesses.
Wealth is not permanent. It is ephemeral. Created by capital, vision, and motivation, inventiveness and hard work.
Likewise is easily destroyed by the incompetent. That is why any investment is best considered by who is running the enterprise rather than looking at past history.
Many a family business success has been squandered by the succeeding generation(s).
Many a government “wealth” fund has evaporated.
First, IF brexit occurs – and I doubt it will – Britain will surely find ways of attracting more – rather than less – FDI using their new freedom from the EU and, as Deco says, our lot will quickly ensure that any benefits as sketched by David above will probe to be pie in the sky. Second, if you are speculating about our wonderful gains achieved by doing nothing except depend on the English voter, don’t forget the US voter too. Even if Trump doesn’t get in – and I think he may well – the Americans under any… Read more »
The Share Prices of the U.S.A. multinationals are artificially high because they got earlier chance to get finance than most of the rest of U.S.A. economy AND it at cheaper rate of interest AND much of the finance they then invested into buying shares of their respective multinational so as to raise the price of the shares. So, instead of proposing that the Irish State be given overpriced shares in over-valued multinational, why not arrange it that the multinational gives Irish State be given Bonds payable to the Irish State ? In short ; Why not Bonds instead of Shares… Read more »
“Naive” Suggestion ;
Why not have all 3 of the Irish State’s Governments — #1 “Official” [ Cabinet, Dail, & Seanad, & also the Councils of the Counties & Cities ], #2 “Permanent” [ Civil Service ], & 3 “Hidden” / “Deep State” — be run by talented Crooks ?
“Wise” Answer ;
It already is.
See anybody you know in here:
https://offshoreleaks.icij.org/
At the core of another excellent article is to accept the reality of what the future for global taxation is likely to be rather than head in the sand denial.
Groan.. Conflict of interest?
Great idea David.
Will it happen? No.
It’s too smart for the braindead numbskulls in Leinster House.
Game over.
Elephants in the corner. Water charges. DEBT Technology. Denial. Government deficits. Misery. Misery = No water charges + too much debt + cintinueing government deficits + Denial of the of the impact of Technology on our freedom. Happiness = User paid water charges + gradual reduction in debt levels + prudent government spending + control of technological ownership. Another elephant in the room relates to the unions in the construction industry who want to continue to be paid at the same rates when house that sold at 400k now only fetch 250k – that does not compute but like the… Read more »
And there definitely needs to be a time limit on when construction needs to start and (approximately) finish – otherwise those lands are just going to sit indefinitely, waiting for land prices to escalate.
Regarding BREXIT
Just like in the Scottish referumdum, I believe most people will more happy to keep the status quo.
Should we not be more concerned about a very like Trump presidency? Will he not regard us as the same as the Mexicans with multinationals located here taking potential american jobs?
Would love to see article from David dealing with how Trump may dealk with corporate tax issue.
Reading the article again I realised it is all speculative hype without a shed of evidence to support anything and additionally several mistakes in assertions. How about a share of this company. Just a fine way to loose ones shirt in my opinion. When the stocks drop 90% all that is left is a worthless piece of paper. Quite a bit like paper currency that is inflated to infinity and worthlessness. The Wealth of a country resides in its capital, the education and training of its people and a government that enforces the rule of law but otherwise gets out… Read more »
Bord na Mona were preparing to run the water system 10 years ago. They were developing the expertise in sewage, and they already had the expertise in hydro-engineering. But the two relevant government ministers involved (Hulk Hogan, & Sulk Rabbit) reckoned that the new quango needed to be a billing organization, first and foremost. So they asked An Bord Gais to guide the formation. With the inherent assumption that even though the purpose of the quango was to bill people for what Ming called a third tax for water infrastructure (in addition to the two you already pay), the marketing… Read more »
Anyways, anyways, … how are things shaping up with The Irish State, & the rest of the E.U. also, per the following ;
http://henrymakow.com/confirmedrockefeller_plan_to_g.html
Here is the Transcript referred to in above article ;
http://www.overlordsofchaos.com/html/new_order_of_barbarians.html
Crucial win for Trump ; The “Adelson” Primary
http://www.theamericanconservative.com/larison/trump-wins-the-adelson-primary/
Would be interesting to hear what an economist’s view on what kind of impact on Ireland President Trump’s likely(presumed) policies would have.
“A Leopard cannot change its Spots.” ; And, neither can a Leopardess.
So, the “Dumb Cattle” will be devoured by either of the 2 remaining main contenders [ Proxies of the Dreadful Few ] for the Prezzie Job : Hell-ary Kill-ton & Donald Trump.
Here is more meaty stuff on Trump’s biz. character :
https://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/08/19/donald-trumps-abuse-of-eminent-domain/
http://www.cato.org/publications/commentary/donald-trumps-eminent-domain-love-nearly-cost-widow-her-house
The once radical notion that Donald Trump could be POTUS has now become mainstream. Vote Trump.