• Current students
      • Student centre
        Enrol on a course/exam
        My enrolments
        Exam results
        Mock exams
      • Course information
        Students FAQs
        Student induction
        Course enrolment information
        Key dates
        Book distribution
        Timetables
        FAE elective information
        CPA Ireland student
      • Exams
        CAP1 exam
        CAP2 exam
        FAE exam
        Access support/reasonable accommodation
        E-Assessment information
        Exam and appeals regulations/exam rules
        Timetables for exams & interim assessments
        Sample papers
        Practice papers
        Extenuating circumstances
        PEC/FAEC reports
        Information and appeals scheme
        Certified statements of results
        JIEB: NI Insolvency Qualification
      • CA Diary resources
        Mentors: Getting started on the CA Diary
        CA Diary for Flexible Route FAQs
      • Admission to membership
        Joining as a reciprocal member
        Admission to Membership Ceremonies
        Admissions FAQs
      • Support & services
        Recruitment to and transferring of training contracts
        CASSI
        Student supports and wellbeing
        Audit qualification
        Diversity and Inclusion Committee
    • Students

      View all the services available for students of the Institute

      Read More
  • Becoming a student
      • About Chartered Accountancy
        The Chartered difference
        Student benefits
        Study in Northern Ireland
        Events
        Hear from past students
        Become a Chartered Accountant podcast series
      • Entry routes
        College
        Working
        Accounting Technicians
        School leavers
        Member of another body
        CPA student
        International student
        Flexible Route
        Training Contract
      • Course description
        CAP1
        CAP2
        FAE
        Our education offering
      • Apply
        How to apply
        Exemptions guide
        Fees & payment options
        External students
      • Training vacancies
        Training vacancies search
        Training firms list
        Large training firms
        Milkround
        Recruitment to and transferring of training contract
      • Support & services
        Becoming a student FAQs
        School Bootcamp
        Register for a school visit
        Third Level Hub
        Who to contact for employers
    • Becoming a
      student

      Study with us

      Read More
  • Members
      • Members Hub
        My account
        Member subscriptions
        Newly admitted members
        Annual returns
        Application forms
        CPD/events
        Member services A-Z
        District societies
        Professional Standards
        ACA Professionals
        Careers development
        Recruitment service
        Diversity and Inclusion Committee
      • Members in practice
        Going into practice
        Managing your practice FAQs
        Practice compliance FAQs
        Toolkits and resources
        Audit FAQs
        Practice Consulting services
        Practice News/Practice Matters
        Practice Link
      • In business
        Networking and special interest groups
        Articles
      • Overseas members
        Home
        Key supports
        Tax for returning Irish members
        Networks and people
      • Public sector
        Public sector presentations
      • Member benefits
        Member benefits
      • Support & services
        Letters of good standing form
        Member FAQs
        AML confidential disclosure form
        Institute Technical content
        TaxSource Total
        The Educational Requirements for the Audit Qualification
        Pocket diaries
        Thrive Hub
    • Members

      View member services

      Read More
  • Employers
      • Training organisations
        Authorise to train
        Training in business
        Manage my students
        Incentive Scheme
        Recruitment to and transferring of training contracts
        Securing and retaining the best talent
        Tips on writing a job specification
      • Training
        In-house training
        Training tickets
      • Recruitment services
        Hire a qualified Chartered Accountant
        Hire a trainee student
      • Non executive directors recruitment service
      • Support & services
        Hire members: log a job vacancy
        Firm/employers FAQs
        Training ticket FAQs
        Authorisations
        Hire a room
        Who to contact for employers
    • Employers

      Services to support your business

      Read More
☰
  • The Institute
☰
  • Home
  • Articles
  • Students
  • Advertise
  • Subscribe
  • Archive
  • Podcasts
  • Contact us
Search
View Cart 0 Item
  • Home/
  • Accountancy Ireland/
  • Articles/
  • Comment/
  • Latest News

Comment

Comment
(?)

Ireland’s multinational mirage

Cormac Lucey explores the misunderstood roots of Ireland’s FDI success and questionable management of surging tax revenues against the backdrop of rising state spending Two important aspects of Ireland’s multinational success story are generally misunderstood.  The first concerns the low-tax strategy that has been the key reason many multinationals have located in Ireland.  As Professor Frank Barry of Trinity College Dublin revealed in his essay “Foreign Investment and the Politics of Export Profits Tax Relief 1956”, this low-tax strategy resulted from then Taoiseach John A. Costello overruling the Department of Finance and forcing an idea promoted by the Department of Industry and Commerce into the Budget.  Underlining the precariousness and capriciousness of life, this strategy didn’t begin to really function until the 1990s.  The second aspect of our multinational story, not generally understood, is how utterly dependent our economy is on American business.  While it is widely known that more than 85 percent of the state’s corporation tax revenues come from multinationals, their contribution to other tax headings is not so well-known.  When you consider multinationals’ 55 percent share of Ireland’s income taxes and 54 percent share of VAT – and apply this lower 54 percent rate to other tax headings – you will see that the multinational sector contributes over 60 percent of the State’s total tax revenues.  How well is the state managing the resulting surge in tax revenues? Well, it’s all being spent, and then some.  According to the Irish Fiscal Advisory Council’s Fiscal Assessment Report published in June 2024, “Excluding excess corporation tax receipts, a deficit of €2.7 billion (0.9% GNI) is forecast for this year. This comes despite a strong economy, with record high employment and historically low unemployment. The question arises: if underlying surpluses are not being run now that the economy is strong, when would they be run?” The quality of much of this spending is highly questionable. The epicentre of rampant State spending growth is occurring in healthcare. A recent Department of Health report analysed hospital activity and expenditure between 2016 and 2022.  It reported a 3.8 percent increase in overall activity, compared with an inflation-adjusted rise in expenditure of 45 percent (nominal rise of 68 percent) and a 29 percent increase in staffing numbers. The Department of Health badly needs budgetary incontinence pads. Or maybe members of the Irish public service simply need to learn how to manage.  Consequence-free management is the key obstacle to effective budgetary control. When staff are treated the same regardless of whether they perform extraordinarily well or extraordinarily badly, should we be surprised when mediocrity results?  The Republic’s governing political class is happy to bask in the reflected glory of multinational-induced prosperity. However, according to the 2023 annual report from the IDA, Ireland’s inward investment agency, the global foreign direct investment landscape is becoming “increasingly challenging and complex.”  And, if he becomes the next US President, Donald Trump plans to significantly undermine Ireland’s attractiveness to US multinationals by putting a 10 percent tariff on US imports. Even though it accounts for 69 percent of employment, Ireland’s domestic sector of small and medium-sized enterprises (SMEs) is the orphan of this story. SMEs need targeted tax incentives along the lines of those outlined by Deloitte’s Kim Doyle in the Accountancy Ireland newsletter Briefly. The SME sector also needs a systematic programme to reduce the regulatory burden imposed upon it. Under the guidance of Michael Diviney, Chartered Accountants Ireland recently published Reducing Red Tape, a detailed position paper showing just how that could be done.  The instinctive mindset of government – that ministers are in charge of a great national trainset they can play with at will – flies in the face of the reality that policy decisions involve tricky trade-offs not amenable to facile headlines.  Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.  

Aug 02, 2024
READ MORE
Comment
(?)

Irish companies lead on resilience but fall behind on ambition

Ireland’s medium-sized businesses are more optimistic than their global peers but a more ambitious approach is needed to deliver their expectations, writes Patrick Dillon Ireland’s medium-sized businesses are uniquely optimistic in their outlook ahead of the upcoming US presidential elections and in the wake of the recent elections in France and the UK.  Just 17 percent see geopolitical disruptions as a barrier to growth, compared to 42 percent in the Eurozone and 49 percent globally. This confidence follows through in the main findings among the Irish respondents to our latest Grant Thornton International Business Report (IBR), which captures insights into the outlook of 10,000 mid-market firms across the globe.  Our Irish IBR respondents are optimistic about the outlook for the Irish economy in the 12 months ahead. Close to three-quarters (73%) of the Irish medium-sized companies we surveyed predict a positive future. The findings are reflective of the resilience of Irish companies that have had to navigate a polycrisis in a short period of time, trading through the pandemic, cost-of-living challenges and disruption to global supply chains. This is not just a case of looking at the world through rose-tinted glasses, however. Irish medium-sized companies are anticipating a healthy bottom line over the next year.  Close to three-fifths of the Irish companies we surveyed predict a rise in revenues (57%), profits (59%), and headcount (52%) in the 12 months ahead. While it is fantastic to see such a strong sense of confidence among this cornerstone of the Irish economy, if the last few years have taught us anything, it is that none of us knows what’s around the corner.  To this end, the companies that will continue to succeed in the future will be those that remain hyper-focused on staying one step ahead of the competition – and this is where our International Business Report makes for slightly more concerning reading.  There is a significant difference in attitudes to innovation among Irish firms compared to their international peers. Just under a quarter (24%) of Irish businesses are preparing to increase investment in research and development over the next twelve months compared to three-fifths (60%) of their global peers.  We found a similar gap in levels of planned technology investment, with just under half (48%) of Ireland’s medium-sized firms budgeting for an increase, compared to 67 percent globally. Ireland is a small pool compared to the ocean that is the global marketplace. If Irish firms are to realise their ambition and potential, then they need to look to new markets.  Investing in innovation is key to unlocking these opportunities, whether it is leveraging digital channels to reach customers in every corner of the world or developing tailored products or services for a specific customer segment internationally.  A confident economic outlook is great, but it doesn’t put money in your pocket. To paraphrase Benjamin Franklin, an investment in innovation pays the best interest.   Patrick Dillon is Head of Deal Advisory with Grant Thornton Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Aug 02, 2024
READ MORE
Comment
(?)

SMEs, the supply chain and the sustainability agenda

The CSRD has changed the sustainability outlook for SMEs reliant on business from larger entities in scope of the directive. Susan Rossney outlines what they can do now to keep ahead of the curve  Chartered Accountants Ireland is a global organisation with close to 33,000 members in positions of influence across society and the economy. With fewer than 250 employees, however, the Institute is also a small to medium-sized enterprise (SME). These SMEs are not often discussed in the context of climate change, but their combined carbon footprint is, on average, five times greater than that of their large corporate counterparts, according to CDP, the not-for-profit climate-disclosure organisation.  The European Commission estimates that SMEs contribute more than 60 percent of all greenhouse gas (GHG) emissions produced across Europe.   SMEs tend not to be at the forefront of sustainability discussions either, which have long been treated as the purview of larger accounting practices that have clients with sustainability reporting obligations.  This is expected to change with the implementation of the Corporate Sustainability Reporting Directive (CSRD), which introduces an obligation on (mostly) larger businesses to report on the carbon emissions of their supply chain partners.  As part of this, the focus of attention has moved to the SMEs in these larger companies’ supply chains, caught in a so-called ‘trickle-down effect’. These small businesses are expected to find themselves asked by key customers for climate-related information, often for the first time, with the risk of losing valuable contracts if they fail to do so. Despite this, Irish businesses – particularly SMEs – were found to be reluctant or unable to decarbonise, with 86 percent of Irish businesses having no set commitments or targets to decarbonise, and just 11 percent measuring and tracking performance on total CO2e emissions, according to a 2022 study.  Chartered Accountants Ireland aims to provide leadership in this area for businesses in Ireland, first leading by example in our own SME operations. Here are some of the steps we have taken to act on our central ethos, “for tomorrow, for good”. In 2020, we kicked off an Environmental and Climate Impact Project (ECIP) focused on managing carbon emissions, resources (water, paper, catering supplies, etc.) and waste.  We commissioned an energy auditor registered by the Sustainable Energy Authority of Ireland to carry out an internal energy audit for us, and we are working through their recommendations. Measures we have taken to reduce our carbon footprint include: Beginning the process of splitting our water and premises heating systems; Switching to light-emitting diode (LED) lights; Installing a roof net to prevent seagulls eating the insulation;  You can’t manage what you don’t measure, so in 2022, we invested in locally sourced emissions tracking software.  In 2022, we recorded a 13 percent decrease in carbon emissions on our 2021 baseline, and we recorded a 39 percent year-on-year reduction in carbon emissions at our Dublin headquarters in December 2023.   Similarly, there are many steps SMEs can take to reduce emissions and otherwise engage in sustainability practices. Our online Sustainability Centre signposts a variety of resources available to support businesses in these efforts.  Small steps make a big difference, but it’s a marathon not a sprint. My advice is start now, get help, measure – and keep going.  Susan Rossney is Sustainability Advocacy Manager with Chartered Accountants Ireland

Aug 02, 2024
READ MORE
Comment
(?)

The key to unlocking capital for scaling companies

A new report published by the Department of Enterprise, Trade and Employment could hold the key to unlocking crucial capital for scaling Irish companies, writes Sarah-Jane Larkin The Irish Venture Capital Association welcomes the report, The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, published recently by Peter Burke, FCA, TD, Minister for Enterprise, Trade and Employment.  This comprehensive report highlights the critical role access to finance plays in the growth and development of businesses in Ireland. We commend the government for its focus on enhancing financial support mechanisms to empower Irish enterprises to scale and compete on a global stage.  We are also pleased to see the commitment to establish an implementation committee to immediately start work on recommendations to help high potential start-ups access scaling finance.  The recommendation to investigate options for pension fund participation in scaling equity funds, and encourage corporate venturing in Ireland, is particularly welcome.  This report has been published at a time when Ireland’s economy stands as one of the most dynamic and robust in Europe, comparing favourably to other small, advanced economies worldwide.  However, it has become evident for Irish companies seeking larger rounds of capital that the dramatic transformation in our economic fortunes in the last 30 years cannot outrun the impact of our longer-term economic history.  The measures suggested in The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, if implemented, would contribute to rectifying the deficits caused by this history.  Ireland’s economic history has been marked by periods of colonisation, famine and political upheaval. All have contributed to some of the financial challenges we now face in terms of the capital available to our SMEs today.  During British rule, Ireland’s economy was heavily controlled, leaving little room for the accumulation of private wealth. The Great Famine further decimated the population and weakened economic structures, leading to widespread poverty and emigration.  Up until the 1970s and in the early stages of the boom in foreign direct investment (FDI), Ireland remained largely agrarian.  Our relatively recent prosperity, rooted in an open FDI-oriented economy, has resulted in a shortfall in the institutional and corporate investment typically seen in other European countries.  Unlike other nations, Ireland did not undergo a transformative industrial revolution in the late 18th and early 19th centuries, nor have we had the same opportunity to create domestic multinationals or intergenerational wealth.  As a result, there are very few domestic multinationals in Ireland that typically deploy assets in domestic venture capital funds or direct investment in start-ups. Over the last 30 years, successive Irish governments have implemented various policies to address these challenges, such as encouraging entrepreneurship, providing grants and subsidies for small businesses, investing in education and innovation and seeding a domestic venture capital and private equity industry.  These measures have met with mixed success due to deep-rooted structural issues, however, and the lack of sources of private capital. What The Use of Finance as a Catalyst to Develop a Scaling Ecosystem shows is that, while Ireland’s economic history has been shaped by a persistent lack of private funds, understanding these historical and structural challenges is crucial in developing strategies to overcome them.  The report’s recommendations to incentivise pension funds to invest in growing Irish businesses could significantly boost the available capital.  By enacting the report’s recommendations and addressing these issues head-on, Ireland could build a more robust and self-sustaining economic future.   Sarah-Jane Larkin is Director General of the Irish Venture Capital Association *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Aug 02, 2024
READ MORE
Comment
(?)

The EU AI Act – sweeping regulation brings opportunity and challenge

The European Union’s new Artificial Intelligence Act brings opportunities for businesses but will not be without challenge, writes Keith Power Just seven percent of Irish businesses currently have governance structures in place for artificial intelligence (AI) or generative AI (GenAI). Despite this, the overwhelming majority (91%) believe that GenAI will increase cybersecurity risks in the year ahead. This is according to PwC’s latest GenAI Business Leaders survey, published in June 2024.  The European Union’s Artificial Intelligence Act (EU AI Act) is a sweeping new regulation aimed at ensuring that businesses have the appropriate AI governance and control mechanisms in place to deliver safe and secure outcomes.  Indeed, a large majority (84%) of our survey respondents welcomed the introduction of the EU AI Act, saying regulation is necessary to prevent the potential negative impact of AI in the future.  The new EU AI Act will also bring challenges, however. Its aim is to protect businesses, consumers and citizens in the EU from potential risks associated with AI in terms of health, safety, fundamental rights, democracy, rule of law and the environment.  By introducing standards and providing legal certainty, the Act also seeks to foster innovation, growth and competitiveness in the EU’s internal market.  It is the EU’s first comprehensive legal framework for AI and will level the playing field for businesses using the technology.  The Act adopts a risk-based approach, with its biggest compliance requirements applying to “high risk” AI systems.  These requirements include addressing data governance concerns, mitigating bias, ensuring transparency and implementing a system of quality management.  The Act also requires that users must be informed when they are interacting with chatbots, and that any AI-generated content must be clearly identifiable as such.   Several specific risks are particular to the EU AI Act, including failure to identify all uses of AI across a business as well as the potential for the inaccurate risk classification of AI uses.  The Act also obliges organisations to assess all of their use cases for AI. This may prove an onerous and time-consuming task given the dispersed nature of the use of AI in many companies. The risk of misclassification is high as risk classifications may change as an organisation’s use of AI evolves over time.  This necessitates the implementation of appropriate ongoing governance and control procedures to maintain compliance, bringing its own challenges. There is also a risk that the focus on compliance may lead to a drag on innovation.  The nuanced nature of some of the language used in the Act, coupled with risk classifications and role designations being subject to change, may prove problematic for some organisations.  The use of AI systems by third parties acting on behalf of organisations may also cause a degree of complexity.  There is much to be considered by Irish businesses to ensure they will be compliant with the new EU AI Act.  It will bring competitive opportunities, but complying with the new regulations will be a complex process. Keith Power is a Partner with PwC Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Aug 02, 2024
READ MORE
Comment
(?)

Ireland’s recognition of Palestine: symbol or substance?

European countries that have recognised Palestinian statehood have to decide what impact they will have on achieving a two-state solution, writes Judy Dempsey In May, the governments of Ireland, Norway and Spain recognised a Palestinian state. The war between Israel and Hamas was the catalyst.  Dublin, Oslo and Madrid had lobbied other European governments to be consistent in recognising the state of Palestine and in trying to push forward the idea of two states – Israel and Palestine, living side by side. Their efforts, so far, have come to nought. Now that they have unilaterally recognised Palestine, they face tough questions. First, what do they want this decision to achieve for it not to be just a symbolic gesture?  A state needs land, sovereignty, independence and internationally recognised borders. Palestine has none of these.  The illegal Israeli settlements entrenched in the occupied West Bank, which have continued during the Israel-Hamas war, make a viable Palestinian state impossible.  And, despite support from the Biden administration for a two-state solution, Israeli Prime Minister Benjamin Netanyahu has consistently rejected the idea.  Second, what role will Europeans play, if any, in making a Palestinian state viable?  For decades, the EU paid lip service to the two-state idea, but it was toothless in stopping the expansion of settlements and the flow of funds to the corrupt Palestinian Authority at the expense of genuinely independent civil society movements. The longer the settlement expansion continued, the more radicalised Palestinian society became. Hamas found fertile ground in Gaza, which it has controlled since 2007 following Israel’s withdrawal from the settlements in 2005.  Since then, Gaza’s population has been subject to the dictates of Hamas, which has tolerated no dissent, and to Israel, which has strictly controlled the movement of people, trade, goods and food in and out of Gaza. Now, EU divisions over the conflict are deeper than ever with little prospect of unity on the issue of ending the war or recognising Palestine.  Some other EU countries may follow Ireland, Norway and Spain – but don’t expect unanimity. Spain, Greece, Cyprus, Slovakia and Romania have yet to recognise the independence of Kosovo, which was declared as far back as 2008. If unity is impossible over Israel and Gaza, maybe it is time to find interim options.  What about forming coalitions of the willing instead of enduring endless disagreements and diluted foreign policy decisions? The EU’s differences over how Ukraine could restore its sovereignty and the ongoing disputes over the Israel-Palestinian conflict highlight the need for such coalitions to overcome deadlocks.  While not ideal, this approach may prompt EU policymakers to realise that constant disunity makes Europe weak and ineffective. *Disclaimer: The views expressed in this column published in the June/July 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor. Judy Dempsey is a Non-Resident Senior Fellow at Carnegie Europe and Editor-in-Chief of Strategic Europe

Jun 05, 2024
READ MORE
12345678910...

The latest news to your inbox

Please enter a valid email address You have entered an invalid email address.

Useful links

  • Current students
  • Becoming a student
  • Knowledge centre
  • Shop
  • District societies

Get in touch

Dublin HQ

Chartered Accountants
House, 47-49 Pearse St,
Dublin 2, Ireland

TEL: +353 1 637 7200
Belfast HQ

The Linenhall
32-38 Linenhall Street, Belfast
Antrim BT2 8BG, United Kingdom.

TEL: +44 28 9043 5840

Connect with us

CAW Footer Logo-min
GAA Footer Logo-min
CARB Footer Logo-min
CCAB-I Footer Logo-min

© Copyright Chartered Accountants Ireland 2020. All Rights Reserved.

☰
  • Terms & conditions
  • Privacy statement
  • Event privacy notice
LOADING...

Please wait while the page loads.