|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).
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
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.
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
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.
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
So no increase in head count in period 2007-2011 despite all the ministerial
'Computer services' exports were valued at €19bn in 2007 and
€36.5bn in 2012 -- up 92% and 15%
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
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?