Most of Ireland's gross domestic product (GDP) is generated by foreign-owned corporations. Their wages and taxes stay in the country but their profits flow out to their owners, so their net effect on the economy is much smaller than their GDP effect. To provide better insight into the domestic economy, the non-financial and financial corporations sectors are divided into foreign-owned (S.11a) and domestic (S.11b) sub-sectors. The redomiciled PLCs are Irish by the internationally accepted definition, but their large positions and transactions have little interaction with the rest of the domestic economy, and for this reason they are presented separately from the domestic non-financials as sub-sector S.11c.
Figure 2.1 breaks down the main direct contributions of foreign-owned corporations (S.11a) to GDP (they also contribute indirectly through purchase of goods and services from domestic corporations). The largest part of their impact is net profit, which, as mentioned, flows out to the rest of the world as dividends and reinvested earnings. The next largest element is consumption of fixed capital or depreciation, which is included in Ireland's gross national income. The taxes and wages are small relative to the overall GDP impact but large in national terms (€7.9 billion and €21.1 billion respectively in 2019).
 Further business statistics on foreign-owned multi-nationals in Ireland are provided in the annual Business in Ireland publication. This publication has some differences in methodology (PDF 138KB) with these institutional sector accounts (see note).
|Depreciation (P.51c)||Profit after tax (B.2n-D.5)||Tax (D.5)||Wages (D.1)|
The gross profit (B.2g) and compensation of employees increased in 2019 for both domestically-owned and foreign-owned non-financial corporations. The bar graph (left axis) in Figure 2.2 illustrates the values of profits earned and wages paid in the sector. The line graphs (right axis) show the share of total GVA that is profit. The first group of bars represent the domestic non-financials (S.11b), for which profit and wages are both major components. The second group of bars represent the foreign multi-nationals (S.11a) for whom the profit is far greater than the pay to employees, reflecting the fact that much of their activity is contract manufacturing for which they do not pay wages directly in Ireland. The large increase in profits of foreign-owned corporations resulted in an even higher profit share here in 2019, while among the domestic non-financials there was a slight decline in profit share to 38%. The domestic profit share is close to the ratio for the Euro-area as a whole of 40% in 2019.
|X-axis label||Dom NFC GOS||Dom NFC COE||Dom NFC CoE Profit Share||Foreign NFC profit||Foreign NFC CoE||Foreign NFC profit share|
In this year's publication gross value added at basic prices is broken down by institutional sector, economic activity (A21 sections of NACE Rev.2) and by component (compensation of employees and gross operating surplus at basic prices) here . This allows for analysis within each sector and sub-sector. For example, figure 2.3 shows the compensation of employees in the five NACE sectors with the largest foreign-owned GVA. In some of these sectors, 90% of the GVA is from foreign-owned corporations. However, we can see that the compensation of employees has a very different profile: it is generally either mostly from domestically owned firms or not dominated by any one institutional sector.
 Basic price gross operating surplus is after the addition of taxes (D.29) and the subtraction of subsidies (D.39).
|Nace Description||Dom. Fin.||Dom. Non-Fin.||Fgn Fin.||Fgn Non-Fin.||Gov.||HHS||NPISH||RDM|
Since 2015, capital investment in Ireland has been out of proportion to the long term trend. This is illustrated in figure 2.4, which shows investment in constant prices from the National Income and Expenditure publication. This increase has been driven by foreign-owned NFCs moving intellectual property (such as patents) to Ireland, usually as an company here purchases it from another company in the group.
|Year||Gross fixed capital formation|
Figure 2.5 shows the investment rate of non-financial corporations, which expresses gross fixed capital formation as a percentage of gross value added, for the last six years. The bars on the left represent the domestic non-financial sector, while those on the right are the large foreign MNE's. Figure 2.5 illustrates the extend to which Ireland's unusually high level of capital investment is driven by foreign MNE's. Domestic corporations had a lower and steadier investment rate throughout the period. The EU average was 25% in 2019, similar to that of domestically owned Irish corporations.
|X-axis label||Domestic GVA||Domestic GFCF||Domestic Investment Rate||Fgn NFC Gross Value Added||Fgn NFC GFCF||Fgn NFC Investment Rate|
Foreign-owned non-financial corporations here have higher equity liabilities but also much higher net entrepreneurial income than the purely domestic corporations. Their return on equity is around 21% in 2019, while the domestic NFCs, once the redomiciled PLC's have been removed, have a return of around 9% in this year. The value for the Euro Area is 23% (in Germany it averages over 50% in recent years). Many of the large MNE's are unlisted wholly-owned subsidiaries of the foreign parent and thus their equity liability may not reflect the market value of the enterprise. Furthermore, the substantial foreign direct investment in Ireland is spread across financial instruments, of which equity is only one. The return on equity is illustrated in figure 2.6.
|X-axis label||Domestic NFC Entrep'l inc excl current tax||Domestic NFC Equity Liabilities||Domestic NFC Return on Equity||Foreign-owned NFC Entrep'l inc excl current tax||Foreign-owned NFC Equity Liabilities||Foreign-owned NFC Return on Equity|