Facing twin threats from an impending restructuring of the global corporate tax system and changes to how multinationals organise their workforces, Dublin could be nearing an important inflection point in the city’s development as a major economic centre.
How might its outlook be in five years time? Will it be, as it was before the pandemic, an imperfect and occasionally infuriating city yet still vibrant and undeniably exciting, growing as fast as any other major population centre in Europe?
Or will it by then have limped out the far side of its economic golden age, its growth prospects constrained as its attractiveness for investment is blunted by the removal of Ireland’s corporate tax advantage, while the city’s vibrancy is stunted by an outflow of young workers?
Perhaps by then many of the educated young foreign workers who give Dublin much of its pep will prefer working from home in sunnier climes (or, if they’re Irish, their home towns) for their Big Tech Small Tax employers.
It sounds better than shuttling in the rain between their employer’s Dublin office and the overpriced city accommodation where they are forced to live cheek by jowl with other addled young renters.
Or maybe, if we’re lucky, policymakers will be able to plot a sustainable path for Dublin through the landmines that currently litter the route between the city’s pandemic-scarred present and a continuing bright future, where it consolidates its place as a brilliant investment location.
A disempowering aspect of all of this is that it seems as if Ireland, and especially Dublin, could go either of those two directions depending on decisions taken elsewhere.
Those could be at Cornwall this week at the G7 meeting, where corporate tax still lingers in the background, or in Silicon Valley, where big employers such as Facebook are warming to cross-border remote working.
IDA Ireland, the State's inward investment agency, has long had two strategies – one for Dublin and one for the rest of the State. Its marketing bumph describes Dublin as "Ireland's leading global city and a key attractor of investment and talent". Dublin is Ireland's only "international city of scale" and "an engine" for the economic development of the entire State.
In economic terms, at least, Dublin is to the Republic what Matt le Tissier was to Southampton in his time or Cristiano Ronaldo is to the Portugal national team – that is to say: almost everything. Dublin competes with other big European cities in a way that Cork, Limerick and Galway (no offence to them) never will.
Stung by criticism that it was too focused on the capital, the IDA has in recent years sought to play up its activities in the “regions”, which is Dublin-speak for anywhere where pints cost less than €5 and renting a shoebox costs less than €2,000 per month.
More than 56 per cent of the 260,000 or so direct employees of IDA client companies are located outside the capital’s orbit. Two-thirds of those are manufacturing jobs, however, which are always liable to be shunted to a cheaper location at the drop of an economic hat.
With notable exceptions such as Apple, which has fallen for the considerable charms of Cork, Dublin really is the main place to be for major foreign investors who come to the Republic waving attractive jobs in return for the many benefits of this State's business-friendly regime.
Sexiest beast
Our low-cost (but, it turns out, reputationally high risk) corporate tax regime is not the only benefit, but it is the most obvious one. No matter how much policymakers try to play down its importance to foreign investors, Ireland’s tax advantage is always there, wiggling its hips as the sexiest beast in the State’s economic armoury.
Tax has been front and centre of Dublin’s development for more than two decades. There is now a real danger that this advantage could be blunted amid the bargaining of bigger nations.
US President Joe Biden continually hams up his connections to Ireland. He likes to quote Séamus Heaney poems and belts out all the usual platitudes to endear himself to this country. He has also, to Irish relief, backed the State in the never-ending Brexit talks. But for all his begorrah shtick, Biden was still quick to throw Ireland over the back wall when it came to corporation tax, leading the drive for a minimum global rate that would cut Ireland's 12.5 per cent rate off at the ankles.
It is clear that the tax issue will be settled at meetings such as the G7 and the Organisation for Economic Cooperation and Development (OECD), where Ireland is fighting a rearguard battle over changes that the Government estimates could cost this State at least €2 billion annually.
IDA Ireland has often been lauded, including by itself, for its effectiveness in attracting foreign investment to Ireland. Let’s see how good it really is, if and when its le Tissier/Ronaldo tax advantage is taken away. If the agency fumbles the ball then, Dublin will feel a lot of the pain.
Meanwhile, one of the IDA’s biggest wins for Ireland, Facebook, has announced that it will let staff, including those at its sprawling Dublin international headquarters, work from home after the pandemic. It will even let them move country to do so, which poses an obvious risk to Dublin, which has attracted thousands of young Europeans and others to work here.
There was an exodus of young foreign workers from Dublin when the pandemic hit and their multinational employers allowed them to work from home. Why hole yourself up in wet, miserable Dublin, where everything is closed and in a State that has implemented the most draconian restrictions in Europe, when you can go back to Lisbon or Madrid or wherever, and do the same job from there?
It will be interesting to see how much of the Silicon Valley work-from-home culture sticks after the pandemic. It might be over hyped. Or it might well turn out that the culture expands and becomes entrenched, particularly among the US multinationals that are the lifeblood of Dublin.
Either way, with all of these work and tax changes, there is great change on the horizon for Dublin. Hopefully the city can rise to the challenge.
