Institutional Sector Accounts Non-Financial and Financial 2014

Investment

Expressing gross fixed capital formation as a percentage of gross value added gives the investment rate. The investment rate of the non-financial corporate sector increased from 21.4 per cent in 2013 to 23.9 per cent in 2014 (see Figure 6 below).  The trend in investment is predominantly driven by the acquisition of aircraft by aircraft leasing companies (see information note on the treatment of aircraft leasing in the Macro economic statistics). Consequently the investment rate increased in this period by 2.5 per cent.

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 3 – Balance Sheets AF.5). The various components are graphed in Figure 7.

The impact of the redomiciled plcs or corporate inversions on this indicator has been quite significant over the past few years and is a significant factor in explaining the downward trend in the rate of return.  For example most of the increase in the equity balance sheet position from €489bn in 2013 to €630bn in 2014 is related to the arrival of corporations relocating to Ireland.  In fact since 2004 the equity position has risen from €164bn to €630bn in 2014 while the after tax entrepreneurial income has risen from €43bn to €70bn over the same period.   As a result the return on equity fell to 11% in  2014 from 13.9% in 2013.