International Economics
What does foreign direct investment really mean to Irish economy? Dawn side of MI!
We want to dig a little big dipper in the foreign investment. !
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Foreign Direct Investment (FDI)!
Contribution of FDI to Irish economy!
¬ Contribution of the MNC’s to the Irish economy can be easily exaggerated by failing to take account of the high level of imports (including patents, royalties and other intangible inputs) and the very high level of repatriated profits.!
The impact can be exaggerated and we can summarize it with three bullet points: import and inputs, transfer pricing and repatriation of profit.!
Explanation: first, multinational corporations produce outputs (things). However, not all the raw materials or inputs are sourced in the Irish economy. These inputs would include physical inputs such as copper (good conductor) for wires and electronics and intangible inputs such as if I’m building a product and I have to use a certain software package, I have to pay royalties to the producers. !
The second issue (transfer pricing) involves putting business conducted elsewhere though the accounts of the Irish branch; so that, the parent company will only pay the Irish rate of corporation tax (12.5%). Multinationals route the profits made elsewhere to Ireland because it’s cheaper: it’s sharp but it is perfectly legal. They can do it because if I have a German plant and I’m producing glasses and there is a Slovenien customer, I tell him to pay to an address in Ireland. This has nothing to do on what I produce. The difficulty with this is that it over-exaggerate the real level of economic activity. It gives us a false figure.!
The last issue (repatriation of profit) involves many multinationals that do not reinvest their profits back into the country instead they send them back to head offices. The money that they make distorts GDP and GNP figures. This leaves Ireland in the unique situation that “our” GNP is less than “our” GDP. In other country of the
We want to dig a little big dipper in the foreign investment. !
!
Foreign Direct Investment (FDI)!
Contribution of FDI to Irish economy!
¬ Contribution of the MNC’s to the Irish economy can be easily exaggerated by failing to take account of the high level of imports (including patents, royalties and other intangible inputs) and the very high level of repatriated profits.!
The impact can be exaggerated and we can summarize it with three bullet points: import and inputs, transfer pricing and repatriation of profit.!
Explanation: first, multinational corporations produce outputs (things). However, not all the raw materials or inputs are sourced in the Irish economy. These inputs would include physical inputs such as copper (good conductor) for wires and electronics and intangible inputs such as if I’m building a product and I have to use a certain software package, I have to pay royalties to the producers. !
The second issue (transfer pricing) involves putting business conducted elsewhere though the accounts of the Irish branch; so that, the parent company will only pay the Irish rate of corporation tax (12.5%). Multinationals route the profits made elsewhere to Ireland because it’s cheaper: it’s sharp but it is perfectly legal. They can do it because if I have a German plant and I’m producing glasses and there is a Slovenien customer, I tell him to pay to an address in Ireland. This has nothing to do on what I produce. The difficulty with this is that it over-exaggerate the real level of economic activity. It gives us a false figure.!
The last issue (repatriation of profit) involves many multinationals that do not reinvest their profits back into the country instead they send them back to head offices. The money that they make distorts GDP and GNP figures. This leaves Ireland in the unique situation that “our” GNP is less than “our” GDP. In other country of the