Mr. Seamus Coffey:

In terms of GNI*, traditionally, the view in Ireland would have been that to get a measure of Irish national income, one would subtract the profits of the foreign multinationals and go from GDP, the measure of output to GNP, the measure of income, and one would have net factor income from abroad, how much of the profit earned here accrues to shareholders abroad, primarily in the US. Until recently that adjustment would have been sufficient. GNP would have given a pretty useful measure of what was happening to the incomes of Ireland and Irish residents. That would have been standard way of doing it. There is a gap between GDP and GNP. Until recently, it may have been appropriate to put some of these ratios, just in terms of GNP to get an Irish comparison. Now that has been distorted itself. We have additional factors that are causing the measure of national income that was previously used to be further distorted.

For example, some of the companies are redomiciling to Ireland. Where are the profits being attributed to? Not only do we have US companies setting up operations in Ireland, but some have redomiciled here in recent years in so-called inversions. In this way, companies do not change their presence in Ireland and retain their presence around the world. If a company has a factory in the US, Germany or Kinsale, the profit generated by that factory gets attributed to the US. When the company redomiciles to Ireland, the profit generated by its factory in New Jersey or Germany gets attributed to Ireland. If the company distributes the profit as dividends to its shareholders, that is not an issue because there is money in, money out and the net effect is zero, but these companies do not distribute all their profits as dividends. Rather, they retain them for investment and many other purposes. As long as these companies have retained earnings that they are using for investment, it is counted as Irish income, but it is worth nothing to Irish people. Companies domiciled here might generate profits in Germany and invest them in France, but it is counted as Irish income. GNI* will account for these redomiciled companies by stripping out that income.

A second factor that is influencing the Irish measure of income has been the onshoring or shifting of intangible assets to Ireland, mainly by US companies. Once the intangible comes to Ireland, a large amount of profit is attributed to it. Many US companies generate their profits through their intellectual properties, IPs, for example, pharmaceutical companies with patents and products or communications technology companies with their software, branding or products. Once they shift their IPs to Ireland, the profit is declared here. One might not believe this to be an issue and that the profits attributed to Ireland will be stripped out in the traditional way before returning to the measure of Irish national income, but the issue is that the measures are all gross, for example, gross domestic product and gross national product. When these IPs - these intangible assets - are moved to Ireland, there is a large amount of depreciation. An intangible asset might be worth a great deal now, but if a patent or licence for a product has a fixed life, its value is written down as the end of that life nears. These assets are depreciating in value. They earn large profits that are attributed to Ireland, but nothing flows from them. Due to the depreciation, they do not show up in the accounts.

The role of GNI* is to correct for these two factors. It strips out the earnings of redomiciled plcs that are not attributable to Irish residence and accounts for the depreciation of intangible assets. The profits being generated by assets in Ireland are not going to Irish people. The traditional shift of stripping out the profits of US multinationals to go from GDP to GNP will still happen, but GNI* proposes two further adjustments: to account for the profits of redomiciled plcs, which in recent years amounted to a significant sum of between €8 billion and €10 billion; and to account for the depreciation associated with the IPs that are relocated to Ireland, which could be between €25 billion and €30 billion. These will be significant adjustments when they are made, given that the factors in question contributed to a 26% GDP growth. GNI* should give us a better indication of what is happening to the income of Irish residents. That is the hope. Perhaps there will be other distortions further down the line, but those two are significant.

The CSO will publish GNI* in the coming weeks, including on an historical basis for previous years, so we should be able to see what actually happened in 2015. We had a 26% GDP growth rate as well as an 18% GNP growth. We would like to know how the economy grew in 2016 and whether there were similar distortions. The future data sets will be useful. GNI* will allow us to get a better indication of the underlying position of the economy.

We would love to be able to answer the question on whether there is an infrastructure deficit in Ireland. This is not unique to Ireland. Most countries have poor data on their public capital stock. In terms of roads, buildings, schools, hospitals and transport, do we know how we compare with other countries? In that respect especially, it is difficult for us to know how we stand. We do not know whether we have an infrastructure deficit. We can say that we do, but it can be difficult to know what is happening in other countries to allow for that comparison to be made. Someone could argue for one project over another in terms of public transport, roads, hospitals and so on, but that is not the job of the IFAC. We examine the overall fiscal situation.

I tend to agree with EUROSTAT's view of where the risk in public private partnerships lies. The risk should not be shifted off the balance sheet, particularly in transport projects where a fixed number of users is required for the companies that developed the projects and the Government has to make up the shortfall. It is clear that the risk lies with the government sector.