The Industrial Development Authority (IDA) gets a lot of praise for its worth attracting jobs to Ireland, but looking behind the numbers, but that’s not its primary mission. It’s all about tax.
In its latest annual report (for 2009) the IDA touts its headline figures: 125 new foreign investment projects in Ireland; €500 million invested in R&D; 4,500 new jobs; €110 billion in exports from IDA companies.
Those IDA companies account for 70 percent of all Irish exports, according to the report. In return, they “contributed €19 billion in direct expenditure to the Irish economy”, including payroll of €7.1 billion.
A total of 136,000 people work in IDA-assisted companies, and the agency estimates a further 100,000 jobs are generated in spin-offs.
© Faduda
Finally, those companies pay €2.8 billion in corporation tax, a little over half (55 percent) of the total take. And that’s the kicker. The IDA is a tax-gatherer. Jobs are just a beneficial side-effect.
By contrast, Enterprise Ireland (EI), the agency charged with helping native industry, provides the following statistics in its annual report: Indigenous exporting firms provide 133,523 direct jobs, and about the same number in spin-offs, and spend €19 in the Irish economy. Total exports amount to €12.9 billion, a €693 million increase on the previous year.
In 2009, EI approved funding for 1,460 firms; 7,443 new jobs were created, and €44.9 was approved to support R&D projects. Food and agribusiness account for over half the total exports (and 4,000 jobs) from Irish-owned companies, dwarfing the input from every other sector.
EI spent €249.8 million in supports to industry, gave €14 million to other state agencies, and had an administrative budget of €101 million.
Meanwhile the IDA spent €80,8 million in grants, and €46.4 million on marketing.
How much do Enterprise Ireland companies pay in corporation tax? The report doesn’t say, but an inquiry to Forfas, the policy advisory board for enterprise and science, provides some more details. In 2009, the Irish companies assisted by EI handed in a total of €228.8 million in corporation tax. The total corporation tax for all companies, foreign and domestic, assisted and otherwise, was €3.8 billion.
So, to summarise:
Between them, the IDA and EI account for about 269,000 jobs, out of a total of 1.9 million people in employment in mid-2009 (the number has fallen since then). A further 230,000 or so indirect jobs are also generated. In total them, roughly one in every four jobs depends on the IDA or EI. But while IDA companies account for more than half of all corporation tax, EI firms contribute less than ten percent of the total.
So what?
Well, imagine you’re the minister for enterprise, and the IMF department of finance mandarins tell you to cut your budget, who do you think will suffer more, indigenous firms trying their best to survive and grow, or multinationals? Given how much the foreign firms contribute, the finance officials are unlikely to look kindly on suggestions to cut the IDA budget. Irish entrepreneurs are unlikely to be so lucky. Sure, they create just as many jobs, but so what? Those German bondholders need money now.
Fasten your seatbelts, it’s going to be a rocky few years.