Four-pronged approach to kickstart the economy
KPMG boss Shaun Murphy believes that low taxation, allied with boosts for technology, can help to push forward our economic recovery
WE know that a return to sustainable growth means our economy must be based on a broad range of sectors and factors. We also know that we must seek a balance between promoting Irish enterprise and attracting global business. To do all this successfully requires a strategy that focuses on a few key issues.
The topics of tax, talent, technology and track record have been described by the IDA as the "four pillars of attraction" for foreign direct investment. We know from our own clients that these pillars are equally relevant to Irish businesses. It is also clear from our global network that these issues are priorities for countries that compete with us. Thus we need to benchmark ourselves against the likes of Singapore, the Netherlands – and increasingly our neighbours in the UK.
Given the complexity of business, no one solution will accelerate our recovery. We need to improve in a range of areas, with each of the pillars requiring attention and requiring it quickly.
Attracting and keeping mobile talent is a globally competitive battle and taxation plays a key role in attracting talent to Ireland.
Smart people with ambition, whether they are Irish or otherwise, have choices about where they live and work. We need to be both aware of this and proactive in giving them as many opportunities as possible to choose Ireland.
For example, it is essential that personal tax rates are attractive in a global context. This is a significant challenge and one which we cannot afford to ignore.
It is a fact that employees in Ireland pay relatively higher marginal rates of tax early on their salary scales relative to many competitor nations and the rates are very high. This means that highly talented people are at risk of not choosing Ireland. In the case of foreigners looking at Ireland as a career destination, such a tax policy is not helpful.
With a Budget looming, there is a pressing need for the Government to heed the very real concern that Ireland is losing out on the positive impact these people can have on our economy. Foreign talent coming to Ireland increases total employment here. We know this yet tax policy inhibits it.
Irish-based businesses need talented young people to help achieve their objectives.
As the largest recruiter of graduates in Ireland, we have direct experience of just how great a need there is for a skilled workforce. We also know how important this is for the businesses we work with in every sector of the economy. So how do we help improve the prospects of more of our young people?
The areas of technology and languages are vital. Therefore, the role of our education system needs to be continually reviewed. The increasing importance of the technology sector will require greater emphasis on problem-solving, maths and computer programming.
These are fundamental to helping prepare school-leavers and future graduates to take advantage of the many job opportunities in IT and many related sectors.
There is an increasing recognition of the need to prioritise this issue. Computer coding for example is being included as part of the reform of the national curriculum. Whilst this is a welcome step, the challenge remains to match the plans of our competitors who have recognised that across the entire curriculum such skills are fundamental to future economic performance.
Language capability is also an area of concern. For example, Germany is the biggest economy in Europe by a large margin. Speaking the language provides a clear competitive advantage for Irish companies when doing business with Germany. Yet only a small percentage of Irish school leavers finish second level education with German.
This is not an external factor sprung on us without warning and it is something we can influence.
The financial crisis has been the centre of national attention for five years, but building blocks of an economy such as capital investment need greater focus so that current policies also address future economic needs.
Broadband is a case in point. It is the 21st century equivalent of electrification – yet we have been slower than many competitors in rolling it out and there is little public debate about what our future requirements may be. We need to look at what is being done in Singapore and Korea in the areas of speed and accessibility.
To make sure we don't fall behind, we need to ask ourselves the hard questions about what we need not just for today or tomorrow but for five and 10 years hence.
The 2012 Global Entrepreneurship Monitor (GEM) report indicates that Irish early-stage entrepreneurs have a stronger focus on international markets and exporting than their OECD counterparts – demonstrating our global perspective.
We need to keep a focus on our technology infrastructure not just to keep Ireland attractive for inward investment, but also to make sure that Irish entrepreneurs in any county can access the global market as efficiently as their competitors.
Our international reputation is steadily improving. Forbes magazine recently named Ireland as the best country in Europe to start a business.
Our state agencies responsible for inward investment and supporting Irish business have a very strong reputation. We have an attractive business tax regime including corporation tax of 12.5 per cent, extensive double taxation agreements and an effective R&D tax credit programme.
All political parties are committed to long term certainty in these areas and this helps establish our track record. We need to retain this commitment and repeat it constantly.
We also need to keep developing as much homegrown success as we can. Our agribusiness sector for example employs over 160,000 people and is performing exceptionally well globally. The sector includes many relatively modestly sized and ambitious companies starting to build scale and expand overseas.
These Irish companies employ significant numbers in places that may not always attract other employers and they have proven their value in maintaining and growing employment. Furthermore, they have the potential to grow and expand globally and become real world-beaters as some of our agribusiness companies have already demonstrated.
Finally, a positive attitude towards business is an essential foundation for recovery. Business and entrepreneurship contribute enormously to society through employment and wealth creation.
The corporate and private income created by business funds the State and enables the State to undertake activities in relation to universal healthcare, social protection and education.
Let's celebrate the contribution of business on the road to recovery. Let's acknowledge its contribution to our society.
Shaun Murphy is managing partner of KPMG