Focus on low tax rate 'misguided'

The recent focus on the Republic as a "tax haven" for technology multinationals and on potential threats to the State's 12.5 per cent corporate tax rate are misguided, according to Michael Daly, chairman of industry group ICT Ireland and country manager of IBM Ireland.

"Companies are here for a multitude of reasons and the financial ones are just a part of the mix. Tax is not the main reason," he said yesterday at the launch of an ICT Ireland strategy document, Vision 2006-2009.

Lionel Alexander, vice-president, Hewlett-Packard(HP) Ireland, agreed that, while tax structures were an attraction, HP and other multinationals based decisions on where to place operations on many factors. "The reason multinationals are here is not tax. We operate in regions where there is zero corporation tax," he said. Quality and availability of employees, general support from the Government, and location also were very important.

However, Mr Daly acknowledged that he would be concerned if US authorities decided to object to how American multinationals use their Irish operations to manage and repatriate profits.

The information and communications technology (ICT) sector was one of the most important to the economy, said Dr Chris Horn, the non-executive vice-chairman of Iona Technologies. "The ICT sector is the saviour of Ireland. Imagine what would happen to the economy without it."

ICT companies directly employ 100,000 people, export €45 billion in products and services, and pay €629 million in corporation tax,€963 million in PAYE and €719 million in PRSI, said Kathryn Raleigh, director, ICT Ireland.

She said the sector needed to be supported through further incentives for research and development (R&D), more encouragement for students to do technology and engineering degrees, and aid for indigenous companies by enabling them to compete for procurement projects.

Dr Horn said indigenous companies needed to better their sales and marketing capabilities and international business skills by collaborating with large companies to go after Government procurement projects, or by getting involved in R&D projects.

"On the other hand, a certain degree of awareness building needs to be done within the State agencies" to encourage the use of products and services from Irish companies, he said.

Ms Raleigh said there was an urgent need to encourage a broader "knowledge economy" in Ireland, which still has one of the lowest rates of PC penetration in Europe, in the low 40 per cent range. By contrast, over 60 per cent of theUK population has a PC in the home, and nearly 90 per cent of Swedish homes, she said.

ICT Ireland would support Government tax incentives through the workplace or directly to consumers to raise the number of home PCs, she said.

The report lays out six areas as "strategic imperatives" for the ICT sector in Ireland to ensure the country "retains and extends a global leadership role" in ICTs.