Since the Brits voted to leave the EU back in June, the assumption that this will induce multinationals to relocate their headquarters across the Irish Sea has provided an air of comfort to talking heads in the Dáil — acting as a silver lining to darkening clouds of uncertainty and anti-globalism.
However, this morning’s news that the parent company of Snapchat will establish its international headquarters in London — rather than FDI-friendly Dublin, Amsterdam or Luxembourg — is evidence that this is a flawed assumption. Further to the point, what is the value of attracting such investment if the real decision-makers stay in London?
It is clear that fear-mongering and European-branding alone will not be enough to lure FDI spoils to Dublin and a stronger sales pitch is needed if we are to bring the people that actually make a difference in these companies to Ireland. We need to do something more to attract key personnel, not just capital, to Ireland.
This is made all the more prescient given the political-standing of the United States. We are less than two weeks away from president Trump’s inauguration, and nobody is any the wiser as to what he is likely to do. He is tweeting against specific American companies, sucking up to Putin and slagging off the UN, yet he is a bag of contradictions. You can argue that in the past few weeks, Trump has played a canny, if confusing, game. He continues to rail against international trade and globalisation, yet he has ploughed on filling his cabinet with American corporate executives who have made their fortunes and have had their worldview shaped by the notion of free trade.
Which way will he jump? Will president Trump call the corporate cavalry home, demanding that American money be repatriated to the US and in the process, drive American investment in America? Or will he back away from the rhetoric, tinker at the margins and not risk a trade war with anyone?
The DNA of his cabinet suggests that there won’t be much change, but with Trump, anything is possible. He is the boss now and these guys work for him. It is essential that Ireland is ready for any protectionist moves, because the country that instigates the first protectionist move doesn’t always get all, or even a significant proportion, of the cash.
If Trump goes protectionist, it will not be the first time Ireland finds itself locked out of the international trading system by the dominant player.
Ireland was locked out of the world economic system by a series of statutes called the English Navigation Laws, which were passed in 1660. These laws prevented sugar and tobacco from the West Indies being landed in Irish ports, despite (or maybe because of) the fact that Irish ports were actually closer than England to the West Indies and the American colonies.
The English understood it was essential to control the waves and therefore the flow of goods, and also how important it was to control where the goods were landed. Because the real money, the real value-added, is only made when you get close to the final consumer. He is the guy who takes the hit, in order for the various wholesale traders to take their cut. In every game, the big money is made only when you see the whites in the eyes of the consumer.
Therefore, where the value-added begins to build is in the place where the valuable sugar and tobacco is landed. The English banned the Irish ports from landing sugar and tobacco via the Navigation Laws – the dominant commercial weapon of the day, used by the colonist over the colony. The US colonies suffered similarly. If the gentry in Dublin wanted to have a smoke with their sugary tea, all three items had to be imported from Liverpool or Bristol. The cash came from the colonies to England and then the Irish paid handsomely for the pleasure.
This obviously meant that the Irish were excluded from the primary money-making part of the great triangular trade of the day. The Atlantic Triangle was glued together by the blood of slaves. Goods came from Britain and were exchanged for slaves in west Africa, and then the slaves were shipped to the West Indies and exchanged for sugar and tobacco, which was then shipped back to England. Because the Irish ships were banned from docking sugar in Ireland, they would have had to make the last bit of what was called “the passage” empty.
Even if Trump ratchets up the protectionist threat, firms will still locate outside the US
So Irish ports were locked out of the great slave trade – which is morally comforting now, but at the time meant that Ireland, like the American colonies, was forced out of the globalisation game. But there is always a backlash. We know that Jonathan Swift wrote Drapier’s Letters largely in response to this English protectionism. Grattan’s Parliament was the direct consequence of this for London. The wily Dutch were constantly undermining the English, diverting colony product to Amsterdam. Ultimately, protectionism led to the great patriotic revolution in America of 1776 – a fact that the patriotic Mr Trump might not be aware of.
The interesting parallel for the modern day is not that protectionism happened, but that it had consequences. Irish ports became smuggling dens – because capital always wants to evade control. The Dutch got rich on the sly. The British lost so much money to American traders using counterfeit documents that the Revolution was probably a blessing to many English traders.
But what is interesting is that the English understood the value not only of trading, but of building the trading infrastructure. They understood that trade was one thing, but more crucially the key to building was creating the commercial hubs of Liverpool and Bristol, where the decision-makers who drove world trade would make the big calls.
This is apposite for Ireland now because even if Trump decides to ratchet up the protectionist threat, money, expertise and companies will still want to locate outside the US. At the moment, Ireland is focused on capital taxation to attract in foreign capital, but what about expatriate income tax packages to attract in foreign decision-makers?
Before you flip and say they should pay the same tax as us locals, consider this: in the future, the only way Ireland will be able to secure permanent investment is to have corporate headquarters here, where significant decisions are made. This is not happening now. In order to make it happen, Ireland needs to match countries like Holland that cap expatriate income tax at 30 per cent. This is the kind of thing that attracts in top corporate decision-makers.
At the top of the corporate food chain, there are footloose global executives – and it is hard for a multinational to relocate its key executive functions to Ireland if we tax them at 50 per cent. They simply won’t come. If they don’t come, we are condemned to be decision-receivers, not makers. And if we are not making the decisions, we are making widgets – to be outsourced the next time there is a big global restructuring.
So it might not sound fair, but Ireland needs to become an attractive place for rich, middle-aged migrants with kids, not just poor young ones with dreams. This is the next phase.
Interestingly, a protectionist Trump could easily give us the reason to do this. If he tries to capture American capital, it will try to escape. It will move – and the more protectionist he gets, the more scared money will be and the more likely global companies will move big decisions out of the US. They will then look to move executive functions out of the States and will look to countries with good international schools and attractive tax packages for their board-level people. They can choose where they want to go. So we have to at least match whoever is in competition with us.
We are talking Netherlands here, not Estonia or Poland. We therefore have to offer special packages to high-end people, as well as an international school or schools for their children. Try telling a foreigner that the Leaving Cert rates abroad!
The world may be about to change: we have to pre-empt it and be clever. Remember, 50 per cent of nothing is still nothing. In contrast, 30 per cent of something may well end up being a huge amount.
Subscribe.
David Ireland is in competition with England, Wales, Scotland, Channel Islands, and the Isle of Man, for inward Investment of capital and labour. As somebody who has over twenty years advised expatriate companies and individuals on international relocation matters, Ireland needs to up its game. The Irish Res Non Dom Regime since 2008 is a start, but Ireland should go further and extend the HQ Regime Taxation of individuals to all non Irish passport holders, not just a select obscure few countries. No Point in FDI attracting some HQs if the decision makers won’t come because the personal tax rates… Read more »
TRUMP IS A KERRYMAN
He is the Healy Rae of social engagement so get used to it
Hi David, Happy new year and all that. There is an inconsistency in the article; Snapchat has just located it’s HQ in a country that vote FOR Protectionism? I presume the goods you were talking about being landed in English ports were raw materials and the real value was added when they were converted to end consumer products so stopping them being landed in Ireland would mean the manufacturing would have to be located in Britain? Was the wealth of England in the industrial revolution not protected from leaving the country through protectionist tariffs for items that had direct competition… Read more »
There is no way this will fly. A screwed middle income tax payer is now expected to pay for everything while higher income executives will be paying less?
The US will keep its HQ in the US. I bet there isnt even a VP level manager in Google or Apple, and I doubt if there is much higher than that planned for SnapChat in London either
One of the ways we could have competed with London was cheaper housing and rent but apparantly that ship has sailed.
News today that portfolio managers at Blackrock – yes portfolio managers, not back-office grunts – are relocating from Paris to Dublin. Who’d a thunk it…
This might not be that attractive. Decision makers in the USA earn big money. Anyone on 416k+ pays a marginal federal tax of 35%. In California the state income tax at that level is 11.3%.
So the big shots are paying almost half their income in tax as it stands, and are happy to stay in California. I’m not sure the Bay Area lifestyle would be sacrificed for damp and drizzly Ireland so easily.
Interestingly the seeds for the American revolution were sown in 1765 when the English imposed Stamp Duty on all official documents there and not Tax on goods. After a major protest, this was withdrawn and then later, taxes on goods were introduced and again, these were withdrawn with the exception of tax on Tea from the East India Company – a stateless tax free entity at the time – that rubbed salt into wounds. They tolerated this tax for about five years before the Boston Tea Party. The English were considering taxing Ireland at that time but it was considered… Read more »
David, The 30% rule in The Netherlands does not work like you think. What actually happens is that 30% of your income is not taxable. That means that 70% is and you very quickly hit the top rate of 52% if you are on a high salary. It also mean that you benefit proportionately less from the mortgage interest tax deduction. It is a nice benefit but you do pay significantly more than 30% income tax overall if you are on the kind of salary that qualifies. Belgium has something somewhat similar that helps expatriates avoid wealth taxes. To be… Read more »
PARTIALLY TRUE ; “Goods came from Britain and were exchanged for slaves in west Africa, and then the slaves were shipped to the West Indies and exchanged for sugar and tobacco, which was then shipped back to England.” . . Many of the ships went back empty for a period I contend ; Such was the high price of African slaves. At least a great many of the ships went back empty for a period having transported Irish slaves. I trust that the merchants did not want to flood the British Isles market & the Irish Isles market with tea… Read more »
HEY, MR. TRUMP, WHAT’A EWES GONNA DO ABOUT THE MOUNTING EVIDENCE THAT THE FOLKS WHO DID THE “USS LIBERTY” FALSE FLAG DID 9-11 TOO ? . . EXCERPT ; . Published on Dec 26, 2016 Please explain to me how starving artists from other countries get the prime real estate in all of Manhattan ? Please explain how starving artists can afford to rent a helicopter and hover outside WTC 1 to conduct some art project where we never saw the result or final outcome. No one thinks it strange that “artists” are roaming around the top floors of WTC… Read more »
Ireland was never a full partner with Britain in these so-called British Isles. Yet a large number of unionist people in Northern Ireland continue to think of themselves as “British”. It was the British imposition of economic nationalism or mercantilism by its 1660 Navigation Acts that restricted free trade to the point where it finally almost strangled Ireland to death between 1845 and 1849. It was only the 1849 repeal of those restrictive laws that saved Ireland from total genocide. The 1660 Navigation Acts were about much more than inconveniencing the Dublin gentry who had to import through Britain the… Read more »
Why would honorable inventive & innovative & industrious people — Irish resident or wandering international Irish or foreign resident Irish or Foreigners — want anything to do with Irish State as David proposes when they get to know about the rotten extravagently paid Nomenclature Civil SERPENTS & Professions & Corporate Ireland suits & … the injustice system here that treats the decent poor people on low wages & social welfare appallingly so ?
.
Irish State is NOT a “bankable” country !
Yes…Yes…Yes, “the wily Dutch” ; . The trouble is that u can be only so wily ; Because, the truth can out-wile even the wily “captive-nation” Dutch. . . Clearly, the Netherlands is NOT a “bankable” country too ; . . Netherlands has responsibility to their own citizens & foreigners with the investigation of downing of Malaysian Airlines MH-17 ; Irish woman is 1 of the murder victims. . It is obvious neither Russia nor the Russian-backed rebels in Donbass region downed the Malaysian Airlines MH-17. . . The evidence points to Ukraine government having done this dirty deed. .… Read more »
I shall postulate two propositions: one unpleasant, one less so: in the grand abstract terms of the Enlightenment, the legitimacy of government derives from the consent of the governed: the result of two centuries of political struggle for the rights and liberties of ordinary citizens and of governance “of the people, by the people and for the people.” The tradition of liberal democracy, hammered out in the United Kingdom after 1688 with much cruelty and the United States after 1776. But in the formative years of the American colonies it was freedoms for only one sort of people: for the… Read more »
PUTIN JUST EXPOSED THE PLOT TO DESTROY AMERICA
.
.
https://www.youtube.com/watch?v=Bee70unn9aM
.
.
Well paid American’s still have to pay US Federal taxes even if employed abroad. They can deduct taxes paid abroad. Therefore surely the sensible thing to do would be to base any proposed expat-tax rate for Yanks on the US IRS tax schedule.
Trump and his reckless lot are not politicians, thinkers or make decisions for the benefit of the their nation or their own people. Whatever protectionist threat comes out of his skull is only to protect his own family and cronies. So the world will not be dealing with the US, instead the world is dealing now with a bunch of very powerful people who got there by rigging the electoral system and using a whole nation as a tool to gain more power. If you remember that Trump said before the election that the results are rigged and that he… Read more »
To be honest, we need to something more deep than what David is recommending. We need to deal with the elephant in the room – the Irish institutional state. It seems that currently there is a lot of fawning over TK Whitaker. Whitaker can to influence matters 20 years too late. And 10 years after the Japanese and Italians took on becomming export economies. But in any case, he did speak the obvious. Much of the recent commentary consists of various statists and veneerists branding Whitaker a what they wished he were. What really happened was that from 1945 onwards… Read more »
The question is not “what will Trump do ?”. The question is “what will we do ?”. From the evidence of the last two months, it seems that Official Ireland wants us to talk bullsh1t. Because that is what Official Ireland is doing currently. The result will be failure. None of the spooferocracy on the radio are going to get their act together. Those parasites are in control of the public discourse. And they are selling a over-szed, unaccountable institutional state that fits within their mindset, and social mores. It does not work. It is running out of “symbiosis” capacity.… Read more »
By the way, the entire ‘taxes-so-low-that-they-are-nothing’ model itself is no longer adequate.
We need to come up with something else.
We need to make the entire system efficient. And that means a 75% reduction in quangos, selling RTE, selling FAS, buildind residential high rise, efficient public transport and talking honestly about debt.
Talking about the ratio of (real) debt to (virtual) GDP, is not an honest conversatiom.
Either we change, or else I recommend you get ready for bailout 2.0.
Morning David
Your article ultimately still promotes a two Tier system of Government , one for the rich or well off and one for middle / lower middle and working class.
cant work……wont work.
Again…I repeat.
This is a wealthy country badly run & nothing will change till we have some cataclysmic event.
snowflakes in January
By the way, the entire ‘taxes-so-low-that-they-are-nothing’ model itself is no longer adequate. We need to come up with something else. We need to make the entire system efficient. And that means a 75% reduction in quangos, selling RTE, selling FAS, building residential high rise, efficient public transport, reduced private sector transport costs, and talking honestly about debt. Talking about the ratio of (real) debt to (virtual) GDP, is not an honest conversatiom. The TASC strategy of lying to the people, whilst enjoying largesse off the public, is not an honest conversation. Either we change, or else I recommend you get… Read more »
18 months from now there will be competition between London, Amsterdam and Paris for external investment. And Official Ireland will be concerned with expressing outrage over Trump, so as to police the serfs here from stepping out of line. Trump is NOT the problem. The problem is how we run Ireland. In Ireland, you have an economy that is Guernsey-plus-Argentina-plus-Jutland. The Guernsey bit is here because of tax rates (Outer Dublin, Cork, Galway). It’s motto is “Ireland is open for low tax business”. The Argentina bit is the corrupt, debt based, borrowing, power hungry, insider run institutinal state that blows… Read more »
Couldn’t agree more Deco. Official Ireland hasn’t been honest with anyone for a very long time. And nor will it be. Why ? No reason to be … no benefit to the powers that be. It’s like the documentary with Ian Kehoe ,”selling off the Irish ” Every economist knows asset stripping is part and parcel of austerity measures. People have talked about how it works here and outside. Yet all the brilliant people ,Constantin , Paul Somerville , DMCW.. all shocked & horrified in their reactions to it on twitter yesterday.. Quite extraordinary… The stupidity , the fake horror… Read more »
Argentina-IRL, is Official Ireland. D2/D4, the Dart line, the media, the county towns, the quangocrats, the extravanzas, gauchos like Paul Hewson and his tax avoiding chums, sports-propaganda, bread&circuses, Brendan Ogle, Ruth Coppinger, Brendan Howlin, Michael Martin, Bertie Ahern, Fintan O’Toole, Michael Lowry, Frances Fitzgerald, Denis O’ Brien, Larry Goodman, the beef “industry”, UCD, UCC, Kings Inn. The legal profession. And loads of jokers. Those whose performance is not assessed, but who opinions are fed as official for the rest to follow. High cost, hard sell, and no spec. Guernsey Ireland – Paddy Cosgrave of the Web Summit, Intel inside, the… Read more »
Your article helped me a lot, is there any more related content? Thanks!
Thank you for your sharing. I am worried that I lack creative ideas. It is your article that makes me full of hope. Thank you. But, I have a question, can you help me? https://www.binance.info/es/join?ref=S5H7X3LP