This publication has used the rich data source provided by the CSO to give insights into many aspects of the ICT sector in Ireland. In Table 7.1 we draw these statistics together in the National Accounts framework. This table is a sequence of accounts, a structure used in Institutional Sector Accounts, to present the flow of transactions in the economy of a country in a coherent series. Each of the items in bold is calculated from the transactions above, creating a linked series of key indicators.

As we have emphasised throughout, this is a sector in which foreign multinationals play a large role. This can be seen clearly in comparing the Domestic and Foreign columns in the table. 

The sequence begins with the output of services produced by the companies: as we saw in the Producers’ chapter, these are mostly IT services and software, with telecommunications and non-software media making up a relatively small proportion of the total. Many of these outputs are exported. 

As we move down the table, we come to the intermediate consumption, the goods and services required to produce the outputs. As we saw, in the chapter on Producers, the inputs into the process are large and intangible, like the outputs. For domestic firms, computer programming and consultancy are their biggest costs and their biggest source of income. For foreign firms, royalties on the licence to use intellectual property (IP) make up the largest part of their expenses. 

The output less the intermediate consumption for any sector is its Gross Value Added (GVA), the third item in the sequence of accounts. GVA feeds directly into the estimate of the country's Gross Domestic Product (GDP) calculated using the income method. Information and Communication Technology contributes more to Ireland’s GDP than any other sector except Industry. Since 1995 (when few homes had Internet access), it has overtaken areas like Construction and Wholesale and Retail Trade in the value it adds in Ireland.

As we saw in the chapter on Productivity, this sector adds a lot of value per employee. In part this is due to the highly skilled workforce, as the Labour chapter explored, but the high level of value added is owed in large part to the capital assets driving productivity. The chapter on Capital explored the large capital assets these companies have built up, through imports of IP and through research and development here in Ireland.

The split of GVA between labour and capital can be seen in the sequence of accounts as we move down through Compensation of Employees (wages) and Gross Operating Surplus (profits). 

Between them the domestic and foreign-owned enterprises paid €8.5bn to their workers in 2019. In line with the higher value added, foreign-owned enterprises paid much of this wage bill: 76% or €6.4bn. That still leaves a substantial €2.1bn of employment income generated here from Irish-owned enterprises. Total earnings of employees in the ICT sector were higher than labour-intensive activities such as Transport, Hospitality and traditional high-earning areas such as Finance and the Professions. As discussed in the Labour chapter, the skill mix in IT is exceptionally high, and this is reflected in the pay per worker.

The majority of the GVA (94%) is value added by foreign-owned enterprises and most of this goes to the owners rather than the workers. As we saw in the chapter on Capital, there is a great deal of money invested in these enterprises, and here the very large return on that capital is shown. Out of total GVA for foreign-owned corporations of €48bn, €42bn (87%) is gross profit while €6bn is paid to workers. Taxes on production (such as local authority commercial rates) are a small part of the GVA.

Of the €42bn profit, the depreciation of fixed capital assets such as the IP, is €13bn, leaving €29bn net profit. The depreciation is relatively high, reflecting both the size of the assets, and the nature of IP in ICT as something that is rapidly overtaken by new ideas and designs. Corporation tax must also be paid out of the profits, and this accounts for €4bn in 2019. The remainder is available to pay interest on loans, reinvest in the enterprise and be taken as dividends by the owners (retained earnings, or reinvested earnings are included in the investment income paid to foreign-controlled corporations, because these earnings are treated as belonging to those owners abroad). 

The picture is very different for domestic firms. Their GVA is €3bn, compared to €48bn for foreign-owned corporations. The majority of this value added (€2bn or 67%) is paid to employees. A further €169m in earned income of the self-employed ICT professionals is 'mixed income' and included with the profits. After accounting for depreciation, this leaves €702m in net profit to pay corporation tax, to be paid as dividends to owners, to be paid as interest to lenders, and to invest further in the business (retained earnings of domestic corporations are part of their Gross Saving). 

After the workers have been paid, the investors have taken their interest or dividends, and the government has received the tax due on profits, the companies are left with gross saving (that is, saving before depreciation has been deducted). The sequence then shows how that saving is used for investment in assets which can be used in production. In the chapter on Capital, we explored how corporations buy the assets needed in production, and in 2019 this amounted to an investment of €46bn.

As the investment was greater than the saving, this left the sector a net borrower of nearly €29bn in 2019. As explained in the Capital chapter, the dominant corporations in this sector have large inward direct investment from other countries, which show as liabilities on their balance sheet. The increase in assets that produced the large net borrowing in 2019 is accompanied by a similar increase in net liabilities to these overseas investors.

In summary, the sequence of accounts (Table 7.1) shows huge output, intermediate consumption, depreciation and outflows of investment income for foreign-owned corporations. These large flows wash in and out and can fluctuate without being felt in the domestic economy. However, they do leave an impact here that is, while small relative to their global transactions, very significant in a small country. The multi-national ICT companies paid nearly €4bn in tax in 2019 and they are big employers, paying €6.4bn to their 50,000 employees. The domestic corporations in this sector, while they are not on the same scale as the foreign-owned firms, employ almost 41,000 people and pay €2bn directly to workers. 

Ireland has become a global hub of ICT services, and the sector has grown twelve-fold in real terms since 1995. Through this value chain analysis, we provide a better understanding of how this largely intangible sector works and what its real impact is on Ireland's economy.