Beginning in 2008, in reaction to proposed changes to corporate tax rate changes in the United Kingdom and the United States, a number of multinational corporations relocated their group headquarters to Ireland. As far as tax authorities were concerned, they were then domiciled in Ireland. These were mainly public limited companies whose shares trade on international stock exchanges. These are the redomiciled PLCs in Ireland.
The redomiciled PLC has a permanent office here, usually with a small staff. The governing board meets here. So these head offices meet the criteria for being Irish resident. However, the board members don't usually work in Ireland and the companies conduct little or no real activity in Ireland. The functions of management and leadership and other productive activity are mainly carried out elsewhere in the world.
Each redomiciled PLC is a company which owns large subsidiary companies that are still overseas. The Irish headquarters holds shares or equity in these subsidiaries, and, because it is the owner, receives the profits of these branches from abroad. Because these are large global corporations, the profits are very significant. The result of this is that there are a lot of profits flowing into Ireland to these companies headquartered here.
In general there are ‘double taxation agreements’ between countries, which mean the same profit cannot be taxed twice. Normally, the profit is taxed when it is first earned by the subsidiary company in another country. Therefore when the profit arrives in Ireland, it has been taxed already and is not taxed again. For this reason, there is not much taxation revenue in Ireland on these profits.
This headquarter company in Ireland is, in its turn, owned by shareholders, who may be individuals or institutions like pension funds. Most of these shareholders are not in Ireland. So when the redomiciled PLC pays a dividend, some of the money goes back out of the country. The dividend paid to shareholders in a PLC is rarely equal to the total profit made by the company. Companies retain earnings to pay off debt, to invest in expansion, or to build up a war chest for the future.
These redomiciled PLCs therefore receive more from their subsidiaries than they pay to their shareholders, and so they are accumulating wealth here in Ireland. Because they are the top company in a group, National Accounts do not show this money as Reinvested Earnings flowing out again. However, as we saw, they have little interaction with the rest of the economy. So while technically the money is held in Ireland, it has little to do with the domestic Irish economy. It is not invested in enterprises here, nor paid to employees here nor taxed here. Just as these companies easily moved their headquarters here since 2008, they can (and have) just as easily move elsewhere.
In the National Accounts we therefore treat these redomiciled corporations as a special group. They are Irish by the proper definitions, they are not the same category as Foreign-Owned Multi-Nationals. However, they have such little interaction with the rest of the economy, that including them with the rest of the Irish corporations would make it look like the domestic economy is accumulating much more money than it really is. The Redomiciled PLCs' investment income is excluded from Modified GNI and they are shown separately in the annual Sector Accounts.