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In 2022, Ireland exported over €80 billion worth of goods to the European Union (EU) and imported over €42 billion in return. The trade relationship with the EU remains a critical pillar of Ireland’s economy. However, it is important to note that the United Kingdom (UK) was Ireland’s largest import partner in the same year, accounting for 21% of all imports. While this may seem surprising given the UK’s departure from the EU, it underscores the enduring economic ties between the two neighbours.
A key area of Irish exports to the UK was food and live animals, which represented a quarter of total exports to the UK in 2022. This sector continues to play a significant role in Ireland’s export economy, ensuring that agricultural products remain vital to trade relations with both the EU and the UK. However, the overall landscape of Irish trade is dominated by just a handful of large corporations. Remarkably, five enterprises alone accounted for 43% of Ireland’s total exports in 2022.
Small and Medium Enterprises (SMEs) also contributed significantly to Ireland’s trade balance, exporting €38 billion in goods and importing €72 billion in the same year. However, despite the notable role of SMEs, the influence of a few large companies is disproportionate. According to the Central Statistics Office (CSO), just five companies accounted for nearly half (44%) of all Irish exports in 2022. Foreign-owned companies were particularly dominant, responsible for 87% of total exports and 73% of total imports, even though they represented only 18% of exporters (2,099) and 8% of importers (3,813). Of the €199 billion in goods Ireland exported in 2022, €173 billion came from foreign-owned enterprises. Furthermore, the ten largest companies accounted for 57% of the value of Irish exports, with large enterprises (over 250 employees) generating 80% of the total export value.
These figures provide a stark picture of Ireland’s trade dynamics, highlighting the country’s reliance on a small number of multinational corporations (MNCs). This concentration of economic activity raises concerns about Ireland’s vulnerability to external shocks, particularly in global markets. The presence of MNCs in Ireland is not only reflected in trade but also in taxation. A report from the Revenue Service in April 2023 detailed the employment and tax contributions of companies that filed corporate tax returns for 2022. Over 2.8 million people were employed by companies filing tax returns, with large corporations contributing €28.9 billion in employment taxes. Foreign-owned MNCs accounted for 35% of employment and 53% of employment taxes among corporate employers.
The receipts from corporation tax have grown significantly over recent years, almost doubling in three years from 2020 to 2022. In 2020, corporation tax receipts totalled €12 billion, but by 2022, they had surged to €23 billion. This growth in corporation tax revenues has made it the second-largest source of revenue for the Irish state, surpassing VAT and second only to income tax, which brought in €31 billion in 2022.
However, the concentration of corporate tax receipts is another worrying factor. Just ten companies accounted for 57% of the total corporate tax receipts in 2022, up from 53% in 2021. These ten firms contributed over €13 billion to the corporate tax pool. Fiscal Council research reported that the top three firms alone paid €5.2 billion in corporate tax in 2021, with the 2022 figure expected to be even higher based on provisional results.
The increasing reliance on corporate taxation, particularly from a small number of companies, has sparked concern among economic observers. Some estimate that multinationals could be responsible for 40% of the revenues of the Irish state when combining corporate taxation, employment taxes, and the income tax paid by employees. While this influx of revenue has bolstered public finances, it also makes Ireland extremely vulnerable to economic disruptions, particularly if global market conditions change or if these MNCs decide to relocate.
For decades, descriptions of the Irish economy have included phrases like “open,” “export-driven,” “international,” and “dynamic.” However, these descriptions also typically conclude with the caveat that the economy is “vulnerable to asymmetric shocks.” The figures provided by the CSO and Revenue Service reveal just how reliant Ireland’s economy is on a handful of MNCs. This vulnerability resembles the situation in 2009, when the global financial crisis revealed deep structural weaknesses in Ireland’s economy. Given the current dependence on corporate tax receipts, there is growing concern that Ireland could again face significant economic risks.
The substantial increase in corporation tax revenues over just three years is clearly unsustainable. The Department of Finance has referred to this spike in revenues as “froth,” warning that these gains should not be viewed as a reliable basis for future budgeting. Economic experts have suggested that the government adopt an approach similar to Norway’s response to its North Sea oil and gas windfall. Norway established a sovereign wealth fund in 1990, using only the income generated by the fund for current spending while preserving the capital for future generations. Ireland has yet to adopt such a long-term approach to its newfound wealth from corporate taxation, leaving the country vulnerable to future economic downturns.
The Fiscal Advisory Council has echoed these concerns, warning that Ireland’s growing dependence on exceptional corporate tax receipts could pose serious risks to fiscal stability. The Council’s analysis suggests that €6 to €9 billion—between 40% and 60%—of the €15.3 billion in corporation taxes collected in 2021 are not directly tied to the performance of the domestic economy. Instead, these receipts are considered “excess,” driven by factors outside of Ireland’s control, such as the global operations of multinational corporations.
Another critical issue is the nature of the industries driving these corporate tax receipts and exports. While many think of Ireland’s big MNCs as tech giants, pharmaceuticals dominate the country’s export profile. The chemical and pharmaceutical industries are Ireland’s largest exporters, with the U.S. serving as the largest market for these goods. This creates another layer of vulnerability for Ireland, particularly as political pressure mounts in the U.S. to reduce dependence on foreign pharmaceutical production.
The U.S. currently runs a substantial trade deficit in pharmaceuticals, with Switzerland and Ireland being the largest beneficiaries of this imbalance. The high cost of medicine has become a political hot button in the U.S., and some have questioned why American companies are manufacturing drugs in Europe, paying low tax rates, while American consumers face the highest prescription drug prices in the world. Reuters reported in 2015 that Pfizer, for example, used intra-company transactions to shift profits to its Irish subsidiary, Pfizer Ireland Pharmaceuticals, to benefit from Ireland’s lower tax rates while selling drugs back to U.S. affiliates at higher prices.
This type of tax strategy has drawn increasing scrutiny in the U.S., especially following President Trump’s 2017 tax reforms, which aimed to reduce corporate tax rates and encourage U.S. companies to repatriate profits held overseas. While the effectiveness of these reforms remains a matter of debate, the fact that Ireland’s economy is intertwined with these global tax strategies should raise alarm bells. As the U.S. looks to address its pharmaceutical trade deficit and the high cost of medicine, Ireland’s role in this global system could face pressure.
When leaders like Lemass and Whitaker first sought Foreign Direct Investment (FDI) to drive employment and wealth creation in Ireland, they were right, and the strategy worked wonders for a country once known for exporting its people. However, the failure to develop a robust domestic economy of innovators and exporters in parallel with the influx of FDI has left Ireland vulnerable. The current economic model—dependent on a small number of MNCs—resembles a delicate china teapot: it works well and looks impressive, but it wouldn’t take much to break it.
The risks are clear, and unless Ireland takes steps to reduce its dependency on these extraordinary tax revenues and diversifies its economy, the next asymmetric shock could be just around the corner.