Irish Economy
Irish overseas 'contract manufacturing' mainly tax avoidance
By Michael Hennigan, Finfacts founder and editor
Feb 16, 2015 - 7:53 AM

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Irish overseas 'contract manufacturing' has got a lot of attention in recent months following a Fiscal Advisory Council's report last November but there is a reluctance to call it what it is: tax avoidance.

The CSO told us last year that it's not new and we are aware that legitimate overseas contracting is not unusual

However, we reported in 2012 that Dell Products Ireland which closed its PC plant in Limerick in 2009 remained one of Ireland's biggest exporters and manufacturers as it booked the output of its Polish plant in Ireland.

The issue got attention last year because of a spike in goods exports in the first half of the year that had not been accounted for by the CSO in its normal trade report based on customs data.

The Fiscal Advisory Council said in November that 43% of the rise in GDP in the first half of the year resulted from overseas contract manufacturing.

Friday's CSO trade data for 2014 show exports rose 2% and imports by 7% in 2014 but the Central Bank forecasted rises of 10.7% and 10.5% respectively in 2014 — the smaller margin between imports based on customs data and the CB total indicates the net exports as additional imports account for only 3.5% — giving a boost to GDP from the tax avoidance.

The avoidance effectively just involves accounting entries assigning the goods to the Irish multinational.

The Central Bank in is January Quarterly Bulletin [pdf] forecast normal export and import rises of 5.2% and 5.1% in 2015.

The spike in contract manufacturing in 2014 related to the chemical pharmaceutical sector. Chemicals and medical devices accounted for 58% of customs tracked exports.

Almost half of annual services exports are also related to tax avoidance:

Irish Economy: Ireland's ephemeral services export boom

Forty American firms account for two-thirds of Irish exports

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