Vol. 422 No. 4
10 Mr. Rabbitte asked the Minister for Finance if he will outline (a) the estimated level of profit repatriation by multi-national companies operating in Ireland in 1991 and (b) the anticipated level for 1992; and if he will make a statement on the matter.
The latest full-year estimate of profit, dividend and royalty outflows published by the CSO relates to 1990, when they amounted to £2,452 million. CSO data for the first half of 1991 indicate gross outflows of £1,098 million, compared with £1,203 in the same period of 1990.
My Department estimate that gross profit, dividend and royalty outflows in 1991 may have been somewhat lower than in 1990, in particular because of export price trends. There has been relatively strong export growth over recent months and a pick-up in export prices in those sectors which are predominantly foreign-owned. Accordingly, my Department anticipate a significantly higher level of gross outflows in 1992.
These outflows, to the extent that they relate to industry, should be seen in the context of industrial turnover of around £22 billion and industrial exports of £12.5 billion, in 1991. The ability to repatriate the profits earned by their Irish subsidiaries is an important factor in attracting foreign firms to locate here. The importance of such firms is illustrated by the fact that in 1988, the latest year for which data are available, foreign owned enterprises accounted for 44 per cent of total manufacturing employment. In addition, such firms also purchased major amounts of Irish raw materials and services, estimated at £2.4 billion in 1990 by the IDA.
Is the Minister concerned about the fact that profit repatriations by the multinationals have risen from something like 2.9 per cent of GNP in 1980 to almost 12 per cent this year? Does he think it poses a serious problem for the Irish economy, particularly given the statistics he gave to Deputy Noonan a short time ago about debt-borrowing requirements and so on? Will he also agree that this trend is a serious bleeding of our economy? Does the Minister have any proposals to encourage these companies to reinvest their profits in the State?
As the Deputy knows, there is a number of schemes — the most notable under section 69 of the 1984 Act — to encourage repatriated profits to invest here. However, I am sure the Deputy will agree that we should have a high rate of productive investment and, indeed, we discussed that last night on the ICC Bill. The fact that investment is funded from the profits of foreign-owned firms or elsewhere is of secondary importance and if firms cannot make and distribute profits as they think fit they will not locate here. Naturally, Government policy is to bring about conditions which will encourage investment and growth leading to a substantial increase in employment. In budgetary terms the effect of the changes in GDP to GNP by profits repatriation does not do any harm to the economy. Like the Deputy, I should like to see more of the money invested in the areas to which I referred earlier; this policy is being actively pursued by the National Treasury Management Agency, probably more actively than has been the case in the past.
Like the Minister, I welcome the fact that companies invest here and create employment. However, the question of the ultimate value must be balanced against the cost of grant-aiding these countries in the first place and the degree to which their profits are repatriated. The Minister mentioned a figure of £2 billion for purchases. Will he indicate to what extent he believes that figure could be increased if the linkages programme — which has been promised by the Government for some time now — was implemented?
It is hard to put a figure on it but the bonds issued to date under section 69 in most of the European currencies, Canadian and US dollars, amount to £520 million. There is room for an increase, not just in that area but in others to try to encourage companies to invest more of their profits instead of repatriating them. It is a difficult area and the freedom of overseas companies to repatriate profits must be handled delicately. Section 69 is a good way of doing this and the link between the IDA and the National Treasury Management Agency is also a good way of doing it. No foreign company can claim that it affects their activities although I am not denying that there is scope for improvement.
Deputy De Rossa rose.
A brief question, please. Progress has been very slow.
Have the Minister's Department carried out any research into the extent to which the figures quoted are inflated by price transfer operations by these companies? It is commonly believed——
Brevity, please.
——that the profit figures for these companies are inflated so that they will benefit from the very generous tax concessions here in relation to their profits.
I do not have figures in that regard but I know that sub-committees linked to the Cullition report looked at that issue.
