Talent is an increasingly differentiating factor when attracting high-value sustainable inward investment, writes Shaun Murphy.
Many countries now have the basic elements in place to attract typical inward investment projects. Competitive tax rates, sufficient infrastructure and established investment promotion agencies are common features in the global FDI environment. The need to seek continuous additional competitive advantage has been well recognised by the Irish Government, IDA Ireland and the wider business community. So what else does Ireland need to do to ensure we maintain our inward investment success? Definitive policy measures on various corporate tax measures as announced last autumn have set out a clear and welcome roadmap. Our 12.5% rate is established, the elimination of the so-called ‘Double Irish’ is in process and we await the detail of the proposed Knowledge Development Box initiatives announced in Budget 2015.
In seeking points of difference to maintain our national success, government policy is increasingly also focusing on talent. For example, in the recent ‘Policy Statement on Foreign Direct Investment in Ireland’, the Minister for Jobs, Enterprise and Innovation, Richard Bruton prioritised talent as a key driver in sustaining our FDI success. Attributes such as problem-solving, creativity, design-thinking and adaptability were all cited as attractive characteristics to be developed and nurtured. Across KPMG’s client base of global and Irish-owned businesses we are well aware of how securing these talents has become a greater priority for decision makers.
At present Ireland’s talent scorecard is impressive. According to the 2014 IMD World Competitiveness report, Ireland ranks first in the world for the availability of skills and fourth for the quality of our education system. Furthermore, Ireland is undoubtedly an attractive destination for internationally mobile and skilled people.
As ever, the issue of personal tax in motivating people is at the heart of some of the policy challenges Ireland faces. It is self-evident that labour in Ireland is taxed too early on the earnings scale to bear positive comparison with other markets. No one in business doubts the difficulties government faces in addressing multiple demands on the public purse. However, I believe there is an emerging risk that unless these taxation issues are addressed sooner rather than later, Ireland will lose out in the area of talent appeal.
There are encouraging signs that this challenge is recognised. In my view, this is just as much about helping keep our brightest and best in Ireland as it is about keeping us attractive to a global audience. Self-employed entrepreneurs for example are penalised by the current tax code. Entrepreneurship and business acumen know no nationality – thus hopefully Budget 2016 will address these anomalies.
The ‘Policy Statement on Foreign Direct Investment in Ireland’ also makes reference to ensuring Ireland is a great place in which to live and work. We cannot afford for this to be a mere aspiration without specific policies in place to make things happen. The central premise is that talented people the world over have, at every stage of their career, growing choices. I have already noted the importance of a competitive personal tax offering and a level playing field for entrepreneurs in making Ireland attractive to these individuals.
… Ireland ranks first in the world for the availability of skills and fourth for the quality of our education system.”
There are other factors over which we have collective and individual influence. For example, globally mobile talented people typically aspire to living in diverse, well run, civic minded, open and sustainable societies. Their criteria in rating a city or country include many things we already do well. These factors are also important because they often attract not just the individual concerned but because they also have ‘family appeal.’ Any talented individual with a partner or family making career defining choices to move location will most likely consider the impact on their loved ones. Part of this process will include an assessment of what is on offer beyond issues such as remuneration and taxes. For instance, we have a schooling and education system that is well regarded. Ireland possesses a beautiful countryside and our sporting and cultural resources are rich. We have a friendly and informal approach that many find attractive.
Strategy and intergration
All these factors are positives but we must not take them for granted. In the policy statement on FDI, Minister Bruton also spoke about a smart business and living environment. This is a particular area of competition amongst many of the world’s most attractive cities and the most liveable countries. If our cities are to deliver further in this area we need to do more. For example we need to extend and more fully integrate our public transport system. We also need to improve our public spaces.
In our countryside, we need to be more protective of water quality and the amenity value of our inland waterways and coastline and the still untapped economic and social potential of walking and cycling trails. We need to treat environmental features not merely as resources to be used up, but as assets to be held in trust. This is patently the approach taken in many competitor countries and an area which has not typically featured in policy debates about next steps for Ireland.
However, when we look beyond tax and the more established issues and assess what competitor countries and cities are doing – we can see that they matter.
Take the example of Dublin. Our capital competes for talent with hugely successful cities worldwide, such as Melbourne, Vancouver, Vienna, Copenhagen and many others – each of which have topped various global leagues of liveability. We need to do the same because the competition we face is not just for inward investors to ‘choose Ireland’ but to ensure that we keep and attract the best people.
These people matter because they have the management, innovation, creative and entrepreneurial skills that Ireland needs. In turn, their employment and associated economic activity funds the tax revenues needed to help run our health, education and other services. In conclusion, such people are incredibly diverse and extremely important. They may be Irish, they may not be – regardless, given increased global mobility, such individuals are on the move to wherever is most attractive. Ireland needs to work hard to appeal to them and thus keep a great pool of talent on tap.