Dr. Tom McDonnell:

I will make a brief point about corporation tax. The global minimum effective tax rate will be 15%, at least for very large companies. Ireland has been able to maintain an effective tax rate well below 15% for a number of years. In fact, it is below 12.5% for many of these companies. Ireland has enabled this through various tax games to ensure very low effective tax rates. That is attractive to those particular companies, of course. They are the ones that tend to generate a lot of corporation tax receipts anyway by locating assets here. The current game is around capital allowances. Northern Ireland would not necessarily be able to engage in the same race to the bottom tactics and therefore would not be able to put quite as compelling a package together for FDI decision-makers in the same way that the Republic of Ireland was able to do in 1990s and 2000s.

As those companies are in the Republic of Ireland now, I am not by any means suggesting they will leave because obviously, Ireland can now no longer be undercut. However, it may mean that the Republic will gain a smaller slice of FDI into the future. The point is that having the floor of 15% now rather than 10% or 12.5% makes the significance of corporation tax less prevalent going forward compared to what it was in the past. Comparing 35% in one country versus 12.5% is very different. My expectation is that we will probably continue to see a broad trend of decline in corporation tax rates around the world. There will be somewhat of a convergence towards 15%. What will be important in the future will not be the rate per se, but also things like research and development tax credits. These credits can be used by companies against their corporation tax burden to reduce the rate. That is contingent upon research and development being located in Ireland or using some type of cost sharing agreement in the United States through a subsidiary and allocating the costs to the company. That could also be done in Northern Ireland, but ultimately it will depend on the corporation tax regime as established in London for all of the tax breaks, rather than just the headline rate. It is not that corporation tax has no impact upon FDI, but we believe it will be much less significant into the future and there is a lot surrounding it.

The Deputy mentioned Northern Ireland having a low-cost economy, which is correct. It also has the human capital issue that we pointed out earlier on. This means that certain types of FDI are unlikely to come to Northern Ireland. Other types may but they will be different in composition to the types of firms coming to the Republic of Ireland, where the human capital base has been long-established for two or three decades. This is not to say that Northern Ireland could not get the same points in the longer term. Of course it could but it would be the work of a decade or more to achieve.