Voting with Their Feet, International Edition: Irish High Techs, and the Rest of the Country, Are Smiling

A TaxBytes e-mail release from The Institute for Policy Innovation (IPI) provided the first clue to the bigger news that is in the UPDATE below (item has not yet posted to IPI’s web site).

The release notes that the Emerald Isle has a “problem” a lot of countries would like to have:

The Associated Press reports that Ireland has its own immigration problem: lots of big, wealthy high-tech companies are moving there, setting up shop, hiring lots of people and paying them good salaries. We’re talking Google, Yahoo and eBay, among others.

Google’s three-year-old Dublin office has 800 employees, according to the AP.

Moreover, many of the companies have landed in a historically rundown, impoverished section in Dublin, giving it new life.

What is Ireland doing right? Why are high-tech corporate giants leaving Europe for the Emerald Isle?

Low taxes.

Ireland’s corporate tax rate of 12.5 percent is the lowest in Europe. Most of the other developed European nations are significantly higher.

I’ll say. The release goes on to note that the five largest EU countries have top corporate tax rates of over 30%. Unfortunately for the long-term growth of high-tech here, so does the United States, at 39.3%.

I could not initially locate the AP article the IPI refers to (found–see UPDATE below — Ed.), but I did find that reports of the country’s high-tech boom are not a bunch of blarney in an Irish Silicon Republic article from last week:

The Republic’s success in the technology industry is well documented: the sector employs 91,000 people in 1,300 companies with a turnover (”sales” — Ed.) of 51bn Euros (2001) and is responsible for producing one third of all PCs sold in Europe. The Republic’s technology sector reads like a who’s who of Silicon Valley, with Microsoft, Intel, Apple, Dell, IBM, HP, eBay, Yahoo! and Google all having bases here.

But Northern Ireland has been no slouch either when it comes to attracting technology investment. In the past year it has attracted notable BPO investments as well as key software research and development (R&D) projects. As well as attracting investments from established businesses in the Republic, such as the aforementioned Imagine and a shared services centre for Grafton Recruitment, the region has won notable international projects, including a €40m, 1,000-job investment by Indian IT outsourcer ICICI OneSource.

The article also credits a “peace dividend” arising from the reduction of Northern Ireland-Irish Republic tensions as improving the business climate.
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UPDATE: I was able to locate a copy of the AP report after learning from Bart Cleland at IPI that is author was Shawn Pogatchnik and doing a search. Pogatchnik latched onto another very important point that ties in to Ireland’s favorable tax situation — people are “voting with the feet” and emigrating there, even from the US:

“A lot of companies are moving out of Europe, but it’s the opposite in Ireland. The companies that have located here, like Google and Yahoo and eBay and so many others, are very attractive. So the place is very young and very international. It’s really quite magnificent,” said Renate Myhrstad, a 26-year-old Norwegian who is Google’s training manager in Dublin.

….. The economic currents that drove millions of Irish to the United States are pulling them back. Since 2001, more than 130,000 Irish people have returned from the U.S. to their homeland, a huge influx in a country of just four million.

Ireland was one of three countries — along with Britain and Sweden — to allow unrestricted access to their labour markets when 10 new members joined the EU in 2004. More than 130,000 Poles live here, and on average 10,000 more Eastern Europeans arrive monthly.

There are three big lessons here:

1. Economic mobility is greater than it has ever been, meaning that countries have to recognize that they are competing against one another for labor and capital.
2. Lower tax rates not only improve the lot of citizens already in a country, but also work to attract productive people from elsewhere.
3. A country CAN handle relatively high levels of immigration, as Ireland apparently has, IF those immigrants are productive people willing to assimilate into the culture and contribute to its enrichment.

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UPDATE: Despite the economic prosperity, Debbie Schlussel has an Ireland story serving as a reminder that certain elements inside the country are making the situation quite a bit less than 100% ideal, primarily because they are not ensuring that the “IF” in Number 3 above always applies.