Thomas Lyons 
Ireland’s economy has been boosted by multinationals during the pandemic, with foreign-owned firms being five times more productive than domestic companies in 2021, according to figures from the Central Statistics Office (CSO). The pharmaceutical sector and technology companies were among the big players that ramped up productivity during the COVID-19 pandemic by making and exporting vaccines, among other essential equipment and medicine. Meanwhile, domestic labour productivity declined by 1% as sectors such as hospitality, transport, construction, and arts experienced a slow return to work due to the gradual easing of lockdown restrictions.
However, there are concerns that some of the manufacturing output by these large companies in other countries has been included in these Irish productivity figures, as many multinationals have headquarters in Ireland. The business group Isme is set to publish a pre-budget submission, which will highlight this issue. Isme’s chief executive, Neil McDonnell, said that if the manufacturing output relates to transfer pricing by a company to avail of Ireland’s corporation tax, then it isn’t real money.
Ireland is often described as having a ‘two-speed’ economy, in which the growth in output for foreign-owned multinational enterprises far outpaces that of the domestic economy. However, Isme is concerned that around a quarter of the manufacturing output by these firms, which contributes to the overall productivity figures, occurred outside of Ireland. Its submission is expected to say that there are some estimates that up to 25% of Ireland’s improved net export performance is attributable to third-country manufacturing.
The CSO figures also highlighted that while Ireland had one of the highest productivity levels in the EU, it reported greenhouse gas emissions per employee in 2021 were over 1.5 times that of the EU average. Ireland’s economy continues to depend on the large multinational presence across the country. Separate CSO figures from earlier this year showed the value of Irish goods exports reached a record high in 2022, rising to €208bn year-on-year despite a sharp downturn in economic activity. This represents a €42bn increase compared to 2021, with the record-breaking figure largely driven by Ireland’s pharmaceutical and scientific sectors.
The Government collected a record €19.7bn in tax revenues in the March quarter, up by €2.5bn from a year earlier, which corporation tax receipts contributed to. The figures demonstrate the importance of multinational companies to Ireland’s economy, particularly during the pandemic. However, there are concerns that the productivity figures may not accurately reflect the true state of the Irish economy, as some of the manufacturing output by these firms may have occurred outside of Ireland. As Ireland continues to navigate the challenges posed by the pandemic, it will be important to ensure that the country’s economic statistics accurately reflect the true state of the economy.
