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You've heard of the luck of the Irish, but did you know the expression has nothing to do with four-leaf clovers or trapping Leprechauns? It comes from the 19th-century gold and silver rush when many of the most successful and prominent miners were Irish or Irish Americans.
In the 21st century, luck is no longer sourced from the unlit depths of mines, but from the dark ink on tax returns. Ireland's famously low corporate tax rate has its economy humming as its EU peers fret about sputtering into recession.
Tech Bros and Shamrocks
Thanks to its attractive 12.5% corporate tax rate, Ireland has long been a pot o' gold at the end of the accounting rainbow for major multinational firms. Tech and pharmaceutical companies with lots of international sales, in particular, have incorporated on the Emerald Isle for extended tax holidays.
According to Ireland's Central Bank, corporate tax revenues have topped expectations for seven consecutive years. This year is no different -- Europe is staring down an energy crisis and war, the world is grappling with record inflation, and Ireland is looking like a financial wonderland:
- Ireland's economy expanded 6.3% in the second quarter, compared to the European Union average of 0.6% (or China's 0.4% and the USA's negative 0.9%). The European Commission forecasts that Ireland's economy will grow at twice the pace of the EU this year and nearly three times in 2023 -- growth so strong that officials say the island of just 5 million, accounting for less than 3% of the EU's economy, is distorting the bloc's economic data.
- Ireland took in almost €9 billion in corporate taxes in the first half of 2022, a pace that would top last year's record haul and help fund a €7 billion cost-of-living package. To underscore just how significant the draw of foreign multinationals is, half of last year's €15.3 billion in corporate taxes were collected from just 10 companies, among them Amazon, Apple, Google, Intel, Meta, and Pfizer.
The flip side is that Ireland has become dependent on all that income. If corporate tax receipts took a drastic hit, that could wipe off 3 to 4% of national income, Trinity College economist John Fitzgerald told the Financial Times, but for now, Ireland is "the equivalent of a household that's just won the lottery," according to Danny McCoy, who heads the Irish Business and Employers Confederation.
Twice Lucky: Ireland's corporate tax buffer will hang around until at least 2024. That's because the OECD-led deal to establish a minimum global corporate tax rate of 15%, originally set for 2023, has been delayed a year. Luck be a shillelagh tonight.