Corporation Tax as a strategy to attract Foreign Direct Investment in Ireland

Abstract

This qualitative study aims to explain the reasons that make the Corporation Tax Policy work at attracting FDI to Ireland and find out the learnings from this process. The results report that the significance of the Corporation Tax rate is lessening as a result of the coordination among OECD countries, however, it remains as the headline for the process of attracting FDI and the most important factors that contribute to this process along with Corporation Tax rate are Tax Incentives, Market Size, Labour, Business friendly environment, Language and Infrastructure, which are also perceived as the reason why the tax rate works.

It was also found out that the increase in the Corporation Tax rate to 15% in the next years is not expected to have a significant impact on companies already established in Ireland, considering their first investment was a bigger decision, and relocation would have to consider additional costs related to the other factors mentioned.

The Irish Corporation Tax Policy is perceived to be shaped in accordance with its results in time and complemented with learnings in terms of compliance, fairness and transparency, that coordination brought. The most significant lesson it generated is the fact that lowering the tax rate is not an injustice to the economy, as it helped establish the foundations for FDI and contribute to the creation of employment that increased the collection of tax as a consequence.