Irish Economy
Irish Economy: No growth in 2012; 6,500 direct jobs account for 52% of services exports
By Michael Hennigan, Finfacts founder and editor
Mar 24, 2013 - 2:34 PM

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Richard Bruton, minister for jobs, enterprise and innovation, announcing 75 new jobs at Guidewire Software, Dublin, Feb 27, 2013.

Irish Economy: There was no real growth in GDP (gross domestic product) in 2012 despite headline data that was issued on Thursday while our estimate is that about 6,500 direct jobs account for 52% of annual headline services exports.

The Central Statistics Office reported on Thursday that the economy grew by 0.9% in 2012.

The two positive contributors to growth were net exports at 2.8% and capital formation at 0.1% (see Page 8 here -- pdf). However, all the exports gains were in services, specifically 'computer services' which grew 15% but this mainly reflects fake exports arising from diversion to Ireland of end-user revenues in other markets by the likes of Google, Microsoft and Facebook.

It’s surreal to observe headlines such as ‘Irish growth bucks eurozone trend’ (FT) and ‘Ireland to lead way with eurozone growth’ (Irish Independent) when absent exclusive dependence on intercompany accounting transactions at non-Irish multinational companies, a contraction would have been reported. In effect, after the illusions of the property bubble, our growth story is still dependent on sorcery and this brand is called: 'Double Irish Dutch sandwich' (ABC, Australia report).

Bloomberg reported last January: "Using techniques with nicknames such as the 'Dutch Sandwich,' multinational companies routed €10.2tn in 2010 through 14,300 Dutch 'special financial units,' according to the Dutch Central Bank. Such units often only exist on paper, as is allowed by law."

The effort to avoid tax is led by companies that are benefiting from inventions funded by the US government, including the Internet, GPS and Google's algorithm that was funded by the National Science Foundation.

In 2011 (last year for which financial reports are available), Google Ireland’s reported revenues rose by €2.3bn - - an annual rise of 23%. In recent years, Microsoft’s annual rises have been at a similar level. Apple hides its Irish financial data but as Ireland is the location of its main ex-Americas operations centre, it can be assumed that a similar situation applies.

Google booked 45% of its global revenues in Ireland in 2011 and the result of such moves is that Ireland has the most productive workers on the planet but it is a fairytale.

Google paid Ireland €3m in tax on revenues of €12.4bn in 2011. Its global net income as a ratio of sales was 31%. So Google's tax bill outside the US is very small despite significant earnings.

Net exports of €4.4bn in Ireland's 2012 national accounts, were helped by the timing of intercompany charges.

The Department of Jobs, Enterprise and Innovation issued a statement on Thursday: "Total exports in 2012, at €182.182bn, were at their highest level ever after a 5.5% annual increase, the minister for jobs, enterprise and innovation, Richard Bruton TD said today.

In 2011, total exports increased by 5.3% over the 2010 figure.

The figures, released this morning by the CSO, show that total exports in 2012 were 16% higher than the 2007 figure, the pre-crisis high, and that total exports from Ireland are now at their highest level ever."

The total of  €182.18bn was wrong. The correct total was €177.13bn (see Page 9 here -- pdf).

(Update: The Department of Jobs, Enterprise and Innovation says there is no official value for 2012 and it needs to use the higher value that includes double-counting and mispricing: Irish Economy: Bruton's Department confirms choice of different total values for 2012 exports)

Services at €90.73bn rose 11% in the year compared with goods  exports at €86.40bn, showing that merchandise exports had been overtaken for the first time.

The official line is that this is evidence of ‘moving up the value chain,’ supported by some gullible economists. There are of course real services exports but they are much lower than claimed.

Last year following detailed research, Finfacts estimated that at least a third of Irish services exports related to booking of end-user transactions in other countries, in Dublin.

Facebook prior to its IPO (initial internet offering) last May, said in a filing with the US Securities and Exchange Commission: "The material jurisdictions in which we are subject to potential examination include the United States and Ireland."

In 2012, Microsoft told the US Senate Permanent Subcommittee on Investigations that the average effective book foreign tax rate for the Irish, Singapore and Puerto Rican companies was approximately 4% - - 5.69% in Ireland; 2.78% in Singapore and 1.03% in Puerto Rico.

Last December a House of Commons committee reported: "Google explained in its responses that it minimised tax within the letter of the law and that low tax areas or tax havens influenced where it located its group companies. The vast majority of Google's non-USA sales are billed in Ireland. Google makes money from business to business advertising, adverts which can be targeted to the UK website and to UK Google users. In the UK, Google Ltd recorded revenues of £396m in 2011, from Google Ireland, but paid corporation tax of only £6m. Google Ireland paid for the services provided by the 1,300 staff in the UK. Google had approximately 700 staff who undertake marketing work in the UK as part of their activities, but only 200 of Google's Irish staff of 3,000 were involved in marketing Google in the UK."

The disconnect between rising headline exports and jobs, is illustrated by the fact that jobs in 2012 in the foreign-owned and indigenous exporting sectors, were below the 2000 level despite a rise in the nominal value of exports by 81% and an 18% increase in the overall workforce size.

GDP is not a useful metric for the Irish standard of living because of multinational sector distortions.

Using individual consumption per capita, we are at the same level as Italy.

In the Forfas Annual Employment Survey 2011: the following are the reported employment levels;

Information, Communication and Computer Services [pdf] -  - Full Time Employment (foreign and indigenous) Page 18

2007: 65,064

2011: 65,642

So no increase in head count in period 2007-2011 despite all the ministerial false claims.

'Computer services' exports were valued at €19bn in 2007 and €36.5bn in 2012 -- up 92% and 15% in 2012

In Ireland full-time employment in the internationally tradeable goods and services sectors (foreign and indigenous) at the end of 2012 was at about 292,000 compared with 320,000 in 2000 - - 28,000 lower when the workforce (including the unemployed) was 320,000 people smaller (1.7m compared with 2.17m).

Google, Microsoft, Apple, and international commercial aviation leasing services with about 6,500 employees account for 52% of Irish services exports.

Germany, the UK and France are working with the OECD think-tank for governments and the G-20 group of leading developed and emerging countries to reduce tax avoidance in their countries by US multinationals.

Wonder how Minister Richard Bruton would explain a sudden fall in exports that could  as easily happen as intercompany accounting transactions can give him so much to brag about?


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