Large Foreign-Owned Multi-National Enterprises
In its report of 2016 the independent Economic Statistics Review Group recommended that National Accounts should give greater detail on the structure of the Irish economy, reflecting the significance of foreign-owned multi-nationals here to allow a better understanding of indigenous economic activity.1 These institutional sector accounts therefore provide accounts for 2013 – 2016 for non-financial corporations divided into large foreign-owned MNEs and the rest. These 50 largest foreign MNEs (out of approximately 114,000 enterprises in S.11) are presented as a proxy for all the MNEs in this release. A more comprehensive account of foreign-owned enterprises is currently under development.
As illustrated in Figure 2.1, the large multi-nationals earned 44% of total GVA of non-financial corporations in 2016, but 58% of the total gross operating surplus (B.2g). Eight per cent of the total compensation of employees (D.1) paid by NFCs was from large foreign-owned multi-nationals, reflecting their use of contract manufacturing abroad. Thus the other non-financials account for the vast majority of employment in this sector. Forty-two per cent of the taxes on income and wealth (mainly corporation tax) from the non-financial sector were from this sub-sector.
| Gross Value Added | |
| Large MNE | 44 |
| Other | 56 |
| Gross Operating Surplus | |
| Large MNE | 58 |
| Other | 42 |
Profit Share
The gross profit (B.2g) of the non-financial sector as a whole increased by 4% to €135.4bn in 2016. Compensation of employees (D.1 Uses - wages and salaries), which is the other main component of gross value added, also increased in the latest year, by 6.9%, from €48.9bn in 2015 to €52.3bn in 2016. The bar graph (left axis) in Figure 2.2 illustrates the values of profits earned and wages paid by large MNEs and Others. The line graphs (right axis) show the share of total GVA that is profit. The first group of bars represent the Other Non-financials, for which profit and wages are both major components. The second group of bars represent the large MNEs, for whom the profit is far greater than the pay to employees. As was shown in Figure 2.1 above, only a small proportion of the wages paid by non-financials are paid by the large foreign-owned multi-nationals. Hence, while among the Other Non-Financials around 54% of GVA was profit in 2016, the large MNEs' profit share was 94% in 2016.
| Compensation of Employees | |
| Large MNE | 8 |
| Other | 92 |
| Taxes on Income and Wealth, Paid | |
| Large MNE | 42 |
| Other | 58 |
| X-axis label | Other COE | Other Profit | Other Profit Share (right axis) | Large MNE COE | Large MNE Profit | Large MNE Profit Share (right axis) |
|---|---|---|---|---|---|---|
| 2013 | 40.4345824784839 | 39.0566296164688 | 48.731641649876 | |||
| 2014 | 42.5852288674267 | 44.641683845191 | 50.7473783117474 | |||
| 2015 | 45.1559820914097 | 52.6831658078116 | 53.7069862064963 | |||
| 2016 | 47.9806104232423 | 57.0443739615984 | 54.2070165095476 | |||
| 2013 | 3.114467 | 25.6613617523063 | 87.6554917560994 | |||
| 2014 | 3.346067 | 27.1335966067158 | 87.5499897518948 | |||
| 2015 | 3.780225 | 77.1238630575419 | 94.2322092618895 | |||
| 2016 | 4.314157 | 78.3790573725305 | 93.8170895418585 |
Investment
Non-financial corporations continued to invest heavily in capital assets in 2016. They spent €73bn in total on new capital stock in the year, mainly on intellectual property. This represents a large increase on the €29bn in 2014 and €41bn spent in 20152. As can be seen from Figure 2.3, most of this increase in gross fixed capital formation (GFCF) was by the large multi-nationals. As a result, the investment rate, which expresses gross fixed capital formation as a percentage of gross value added, increased sharply for this sub-sector from 16% in 2015 to 53% in 2016. Among the Other Non-Financials, the spend on investment increased slightly, while the higher GVA caused the investment rate to drop.
| X-axis label | Other GVA | Other GFCF | Other Investment Rate | Large MNE GVA | Large MNE GFCF | Large MNE Investment Rate |
|---|---|---|---|---|---|---|
| 2013 | 80.1463449499206 | 18.4809897620074 | 23.0590549993954 | |||
| 2014 | 87.9684534065024 | 20.9806400950147 | 23.8501863822286 | |||
| 2015 | 98.0936923275711 | 27.312865365438 | 27.8436510211383 | |||
| 2016 | 105.234299237906 | 28.5653409582966 | 27.1445157759051 | |||
| 2013 | 29.2752470361 | 5.60100588 | 19.1322241383421 | |||
| 2014 | 30.9921185412001 | 7.975193 | 25.7329713985121 | |||
| 2015 | 81.8444814799999 | 13.320576 | 16.275472407086 | |||
| 2016 | 83.5445415704992 | 44.121119 | 52.811492134131 |
Return on Equity
The return on equity is a measure of corporate profitability. It is the ratio of entrepreneurial income (B.4g) less taxes on income and wealth (D.5) to total equity liabilities (Table 2.4 – Balance Sheets AF.5). The various components are graphed in Figure 2.4.
| X-axis label | Other B.4g - D.5 | Other Equity Liabilities | Other Return on Equity (right axis) | Large MNE B.4g - D.5 | Large MNE Equity Liabilities | Large MNE Return on Equity (right axis) |
|---|---|---|---|---|---|---|
| 2013 | 46.3298345340125 | 450.65114832705 | 10.2806427335207 | |||
| 2014 | 52.799092571915 | 548.682375560832 | 9.62288838199819 | |||
| 2015 | 60.0055573178417 | 851.75491099237 | 7.04493235594379 | |||
| 2016 | 67.9386846391566 | 897.269813808935 | 7.57171182999627 | |||
| 2013 | 21.6918292476128 | 59.839528323 | 36.2500003852392 | |||
| 2014 | 23.2924320498593 | 77.94879889 | 29.8817074561075 | |||
| 2015 | 67.1801148124353 | 128.153014436 | 52.4217983541739 | |||
| 2016 | 68.42218493838 | 188.869074133 | 36.2273099778091 |
While the net entrepreneurial income of large MNEs is of the same order as that of Other Non-Financials, their equity liabilities are far lower. Thus their return on equity is between 30% and 53%, while Others have a return between 7% and 10%. These Others include large PLCs which have their headquarters redomiciled here, but which have little or no entrepreneurial income here.3
2The level shift in 2015 occurred primarily as a result of corporate relocations that were recorded mainly as changes in the capital asset balance sheets, rather than capital investment. These relocations thus did not add to gross fixed capital formation.
3Further analysis of the foreign MNE's return on investment is given in Foreign Direct Investment in Ireland 2015. The note Redomiciled PLCs in the Irish Balance of Payments provides a more detailed description of corporations relocating headquarters here.
