An Analysis of the Dublin Office Market in regards to its reliance on Foreign Direct Investment Companies and the effects of an increase to Corporation Tax.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Abstract

The following dissertation aims to analyse the Dublin Office Market in regards to its reliance on Foreign Direct Investment (FDI) Companies and the effects of an increase to Corporation Tax could have on it. The inspiration for this dissertation came from the dramatic increase in FDI companies in the take up of the larger office spaces in the last 20 years.

Having started working in the early 1990’s in a recovering economy, right through the boom years and the following property crash, the one constant that stayed with us was the growth of FDI companies.  This significantly changed from been predominantly manufacturing to large volumes of Financial, service and technology companies.

This dissertation investigates the significant share FDI companies have of the large Dublin corporate office buildings and how important our corporation tax rate is to attracting new and keeping our existing companies.

An in-depth literature review was carried out, researching the criteria for what makes the Dublin office market so attractive for FDI in the financial and services and the importance of our current Tax regime to them.

Semi-structured interviews were carried out with relevant workers and professionals to add more clarity and in-depth knowledge to the criteria set out in the literature review.

Risks for the competitiveness of Dublin for attracting FDI are also researched, in order to give the reader the perspective that Dublin is not invincible when it comes to attracting FDI’s.

All of this research forms the basis of this dissertation which the author hopes gives the reader an understanding of the importance of Irelands corporation tax rate to FDI’s in the Dublin market.

 

Glossary

FDI   Foreign Direct Investment EU    European Union

ESRI  The Economic and          Social Research Institute

UK – United Kingdom

MNC – Multinational Company

 

IDA – Industrial Development Authority R&D – Research & Development

US – United States

 

OECD – Organisation for Economic Co-operation and Development

IMF – International Monetary Fund

 

ICT – Information and Communications Technology

IBEC – Irish Business and Employers Confederation WHO – World HealthOrganisation

FTA – Free Trade Agreement

 

Brexit – The withdrawal of the United Kingdom from the European Union on the 31^st January 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chapter 1 Introduction

 

            Introduction to theResearch

 

This dissertation is based on one of the success stories of Ireland Inc., Foreign Direct Investment. The purpose of this dissertation is to analyse the success of Dublin in this field and how important our corporation tax rate is to that success.

The research to be carried out will be mainly secondary research into findings already documented along with primary research to quantify and add to the secondary research.

This will be done to form an opinion on the topic of the importance of FDIs to the Dublin office market and the effects of an increase to our Corporation tax rate.

 

 

            Aim

 

The aim of this dissertation is to: Assess the impact that a rise in Corporation Tax would have on the Dublin Office Market with a focus on Foreign Direct Investment Companies.

 

 

            Objectives

 

• Objective 1: To assess the extent of FDI’s share of the Dublin market over the years.
• Objective 2: To analyse the impact or not an increase in our corporation tax would have on holding onto and attracting ne FDI’s
• Objective 3: To establish the key factors that make a location a desirable choice for FDI’s
• Objective 4: To choose a methodology for this.
• Objective 5: To present and discuss the results from the methodology used.

 

 

 

            Structure of theDissertation

 

The following dissertation has been divided into eight chapters in order for the reader to gain an insight and a better understanding of the chosen topic.

• Chapter One: Introduction – Sets out the author’s aim and objectives and introduces the reader to the context in which the document isbased.
• Chapter Two: Literature Review – This lays out the context for the research and gives the reader a better understanding of the chosen researcharea.
• Chapter Three: Research Methodology – This section gives the reader a full explanation of how the analysis is achieved and goes through the different methods that are used in the process to help the author achieve the aims and objectives set out in chapterone.
• Chapter Four: The outcomes from the Literature review and the methodologies used to research the topic will be discussed in this section. The impacts of issues such as supply, taxation and market conditions will be discussed.
• Chapter Five: Conclusion and Recommendations: In this chapter the author will discuss the conclusions from the analysis and research process. The risk that the Dublin office market has to Corporation Tax increases will be assessed and the main outcomes summarised.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chapter 2 Literature Review

 

            Introduction

 

In this literature review the author will analyse the secondary research in relation to FDI’s, The Dublin Office Market and the importance of Irelands corporation tax rate to influencing same. The chapter will look at a number of points including what is FDI, the story of FDI in Ireland, the importance of the IDA, the share of the Dublin office market that is taken up by FDI companies, Corporation tax rates in Ireland and worldwide.

 

• Definition of Foreign Direct Investment

 

 

Foreign direct investment (FDI) is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy. Ownership of 10 percent or more of the voting power in an enterprise in one economy by an investor in another economy is evidence of such a relationship. FDI is a key element in international economic integration because it creates stable and long-lasting links between economies. FDI is an important channel for the transfer of technology between countries, promotes international trade through access to foreign markets, and can be an important vehicle for economic development. The indicators covered in this group are inward and outward values for stocks, flows and income, by partner country and by industry and FDI restrictiveness. (OECD Library)

There are three main types of FDI

Horizontal FDI ; This is where the investor establishes its own business in a foreign country for example Salesforce has its European HQ in Dublin. This would account for the majority of FDI in Ireland especially in the Financial and Tech sector of which Dublin is a major Hub.

Vertical FDI: This is where the host company invests into a different but related business in a Foreign Country for example

 

A horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it operates in its home country, for example, a cell phone provider based in the United States opening stores in China.

A vertical investment is one in which different but related business activities from the investor’s main business are established or acquired in a foreign country, such as when a manufacturing company acquires an interest in a foreign company that supplies parts or raw materials required for the manufacturing company to make its products.

A conglomerate type of foreign direct investment is one where a company or individual makes a foreign investment in a business that is unrelated to its existing business in its home country. Since this type of investment involves entering an industry in which the investor has no previous experience, it often takes the form of a joint venture with a foreign company already operating in the industry.

 

2.3 FDI in Ireland

FDI has been in Ireland Since Henry Ford opened his manufacturing plant in 1917. In the 1920’s Players and Wills cigarettes opened. The thirties saw the arrival of the likes of Cadburys, Dunlop and Clarks shoes. After World War Two