by David Murphy
The advent of globalist economics has encouraged reductions in cross border transactions and the dispersion of capital internationally through multinational corporations (MNCs). In essence, this opens a new sector of economic activity for countries seeking development: offshoring. By maintaining policy and regulations that benefit MNCs, offshore states seek to gain enhanced FDI inflow to grow their economies.
The consolidation of the European market under the EU raises the potential for offshoring submarkets within the continent. Ireland is a large beneficiary as it has stepped into this role. With a lack of natural resources and a small population, Ireland is forced to be creative when developing models to spur economic growth. By maintaining low corporate tax rates, Ireland’s GDP is valued at over 500 billion USD, with per capita rates ranking amongst the highest earners in the world.
However, Ireland’s financial behavior has created friction with policy makers in the international market. Most recently, OECD is establishing a framework for global corporate minimum tax rate (GMCTR) which seeks to establish a standard threshold at 15% on corporate revenue. This paper analyzes how Ireland signing up for OECD’s plan is set to impact Irish public revenue as well as future foreign investment. A combination of OECD and World Bank data is combined to create a regression predicting future Irish FDI losses. Given the findings of the model, future Irish options to refinance are introduced.
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