Large international corporations are swelling Ireland’s tax coffers. Yet the country’s population is growing even faster than Switzerland’s. The infrastructure is failing to keep up with this rapid development.
Tech boom in Dublin: Numerous international tech companies have set up their European branches in the former port district of the Irish capital.
Imago
«It’s crazy how much this area has changed,» says Keire Murphy. The 30-year-old social scientist and lawyer is sitting on a park bench in a square in Dublin’s Docklands district. Behind her looms the glass-sided Bord Gáis Energy Theatre, designed by architect Daniel Liebeskind on the site of a former gas-fired power station. The harbor basin of the old canal, which connects the River Liffey and the sea with the countryside, stretches out in front of her. Instead of discarded warehouses and shipyards, modern skyscrapers now rise into the sky.
Ireland’s «two-tier economy»
Murphy points to the seven Google skyscrapers and the former Facebook office. The premises of Microsoft and TikTok are located just one block away. In this thicket of expensive residential and office towers, all kinds of law firms and consultancies specializing in the protection of intellectual property or data protection have also set up shop. «Some people no longer call the old harbor district Docklands, but Silicon Docks,» says Murphy, who researches migration at the Economic and Social Research Institute think tank.
Tech companies are providing Ireland with buoyant tax revenue. The national budget will post a surplus of 25 billion euros this year. This figure is being boosted by the fact that Dublin is being required by the European Court of Justice to collect – reluctantly, on its part – one-off back taxes from Apple amounting to 14 billion euros. The judges in Luxembourg believed that tax breaks previously given to the Californian tech giant had distorted competition.
The current governing coalition includes the two centrist traditional parties, Fine Gael and Fianna Fáil, and the Green Party. This influx of money is coming at exactly the right time for them, as parliamentary elections are likely to be held later this year. With its recent presentation of the state budget, the government delighted the population with tax cuts and financial aid aimed at alleviating the high energy prices.
However, along with the tax revenues they are contributing, the major international corporations are bringing migrants with considerable purchasing power. This is fueling population growth and exacerbating the acute housing shortage. A recent study of housing markets in Europe, the U.S. and Canada by real estate services firm Savills showed that Ireland had the most severe shortage of affordable housing among the countries reviewed. Last year alone, real estate prices in Dublin rose by almost 10%.
Between 2012 and 2022, the Irish economy grew by an average of 9% per year. However, the presence of these multinational companies distorts the figures. Wages are rising less quickly than the cost of living, and the general population is not swimming in prosperity. In Ireland, there has long been talk of a «two-tier economy.» In the tech and pharmaceutical sectors, salaries are on a par with those in the United States, at over 100,000 euros per year. By contrast, the average Irish salary is much lower, at around 45,000 euros per year.
Dublin offers tax breaks
Georgie, a 35-year-old from South Africa who asks to be identified only with her first name for this article, is one of the growing number of expats in the country. Over lunch in an organic café in the trendy Portobello district in south Dublin, she says she has always dreamed of living in Europe. However, she and her husband ended up in Ireland four years ago largely by chance, she adds. At the time, she was working for a small tech company in Johannesburg that specialized in designing applications and websites, and was looking to expand into Europe.
Ireland seemed to be a good location for this venture for a number of reasons. It is an English-speaking country that is part of the EU single market, and has close ties to the United Kingdom. Moreover, it already served as a hub for tech companies, and had low corporate tax rates. In addition, the authorities lured Georgie’s company with additional tax breaks offered to newly established companies.
Once the company had established itself in the European market, Georgie accepted a job offer from Google, where she now works as a product designer. She says she has grown fond of Dublin over the intervening years. She and her husband have found a favorite pub, and thanks to her interest in rugby, a love shared by Irish and South Africans, she quickly felt at home. «Even the wet and gray weather is less bad than I thought,» she says with a laugh.
There are disadvantages, however. She cites the poorly developed public transport system, and the acute housing shortage. The couple would like to buy their own home, but this is expensive and difficult, she says. Georgie and her husband currently live in a basement apartment with a living room and a bedroom, which they rent for 2,400 euros a month.
Google’s high-rise buildings (including the black building on the right) have helped redefine the Dublin harbor district also known as «Silicon Docks.»
Paulo Nunes dos Santos / Bloomberg / Getty
Not enough living space
What seems expensive to Georgie and her husband is completely unaffordable for many young Irish people. In St. Stephen’s Green, a music student tells us about poorly insulated and dirty accommodation rented out by property sharks at exorbitant prices. He says he has many friends from outside the city who are studying in Dublin. However, due to the housing shortage, they continue to live in their parents’ homes and commute to the capital to attend lectures – sometimes several hours each way, he says.
According to Murphy, the migration researcher, it is clear that expats from the tech and pharmaceutical sectors helping to push up rental costs and home prices thanks to their greater purchasing power. However, the main reason for the housing shortage is not migration, but rather the political approach to the issue, Murphy emphasizes. «Ireland is building far too few houses to meet the demand,» she says.
Murphy displays a graphic on her cellphone. This clearly illustrates the problem: While the population and housing stock were still growing at a similar rate as recently as 2006, the number of residents is now growing much faster than the available living space. «The state targets for housing construction have been missed for years,» the researcher says. «And even if we were to reach them, they are not keeping pace with population growth.»
Historically, Ireland has been a nation of emigrants. Around 3 million people living outside the country today have an Irish passport. This is the equivalent of more than half Ireland’s population. Yet Ireland’s population growth rate is now among Europe’s highest. There are multiple reasons for this. Compared to other European nations, the Catholic country has a young population and a high birth rate. However, the high level of immigration from both inside and outside the EU has played a role, as has the return of Irish emigrants.
While Switzerland’s population increased by around 20% between 2002 and 2022, Ireland’s population grew by around 30% in the same period. For the first time since the Great Famine of the 1850s, Ireland’s population has exceeded the 5 million mark.
Infrastructure failing to keep up with growth
«The growing population is an expression of a successful economic transformation,» says Niall Conroy. We are meeting with the economist in the offices of the Irish Fiscal Advisory Council, a widely respected body that advises the Irish government on fiscal policy.
Over the last two to three decades, Ireland has rapidly transformed from an agricultural and industrial country into a knowledge-based service economy, Conroy says. This development is due not only to tax incentives, he adds, but also to the high average level of education within the population and the country’s use of the English language. Brexit has also played a role, as it helped strengthen Ireland’s appeal compared to the United Kingdom, as it remained within the EU single market.
«But Ireland is struggling to adapt its infrastructure to demographic developments,» says Conroy. This is evident not only in the housing crisis, but also in the public transport system. There, diesel-fueled trains are still chugging along on the outdated rail network, and Dublin is one of the most congested cities in the world. Streetcars are slow and overcrowded, and plans to build a subway from the city center to the airport have not yet been implemented.
In the health care sector, staffing and funding shortages are leading to overcrowded hospital beds and long waiting lists, Conroy says. Tech companies’ energy consumption and the chemical industry’s water requirements are putting a further strain on resources, he says.
In the latest state budget, the government has promised to create a fund for investments in the water supply system, the electricity grid, the transportation network and house building. However, it did not provide any details on the implementation of these plans. Conroy argues that money is only part of the problem. «Ireland lacks the capacity to implement investments,» he says. He cites the highly bureaucratic planning system and the lack of skilled workers as reasons for this. «Where exactly are the workers who are supposed to build all these new houses and roads?»
Conroy’s Irish Fiscal Advisory Council is critical of the current government’s fiscal policies. Given the booming economy, high levels of government spending could lead to economic overheating, he warns. Conroy cites the financial crisis of 2008, when the collapse of the real estate and banking sector suddenly plunged the country into a recession – and the lack of corporate taxes tore a huge hole in the state coffers. The austerity measures imposed by the EU, the European Central Bank and the International Monetary Fund continue to weigh heavily on the Irish population.
Instead of putting money aside for more difficult times, the government is risking a repeat of the mistakes of the financial crisis, Conroy says. Currently, the 10 largest multinationals here, a group that includes Apple, Microsoft and Pfizer, are responsible for around 60% of the country’s overall corporate tax proceeds. Any collapse in this revenue would immediately throw the Irish budget out of balance. «Of course, they won’t tear down their office towers from one day to the next,» says Conroy. «But a good portion of these taxes are on patents for intellectual property that could be moved to another country at the click of a mouse.»
Rising rental costs and property prices are among the biggest concerns of the Irish.
Danil Shamkin / Nurphoto / Getty
Moving to the countryside?
Ireland is therefore financially dependent on these multinational companies. And there remains some doubt as to whether the planned infrastructure investments will actually be implemented. In the short term, this means that neither the high immigration figures nor the dizzying real estate prices are likely to change much. «In Ireland, the state has always encouraged people to build their own homes, which has embedded the desire for home ownership in Irish culture,» says Murphy, the migration researcher. She says she lived in Switzerland and the Netherlands for several years, where tenants have better protection against dismissal and more rights. In Ireland, by contrast, tenants are generally not allowed to furnish, paint or decorate a rented apartment themselves without the consent of their landlord, she notes.
By Irish standards, Murphy earns a good salary. She nonetheless shares an apartment with three flatmates. Is the 30-year-old hoping to fulfill her dream of buying her own home soon? For young Dubliners without capital from their parents, there are only two realistic options, she says: buying a small city apartment as a couple, or moving to the suburbs or the countryside.
The second option has become increasingly attractive since the pandemic, as most employers no longer require their employees to come to the office every day, Murphy says. However, the public transport connections are so bad that people have to give up their social life after moving away from Dublin, she adds. «In principle, I could also imagine renting long-term,» she says. «But because you have so few rights as a tenant, it’s hard to feel really at home in an Irish rental apartment.»
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Publish date : 2024-10-31 14:03:00
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