Could a Brexit see Ireland get more Foreign Direct Investment?

The ESRI says Ireland's corporation tax is an important factor

ESRI, Brexit, FDI, Foreign Direct Investment, corporation tax, Ireland, EU,

A poster is seen at a Brexit conference in the Aviva Stadium in Dublin | Image: Rollingnews.ie

A new study from the Economic and Social Research Institute (ESRI) has said Ireland could potentially cash in if Britain votes to leave the European Union.

It says: "Ireland and the UK are perceived to be similar as alternative locations" for Foreign Direct Investment (FDI), "in particular by investors from outside the EU and for FDI in the services sector".

"This result suggests that a possible redirection of FDI from the UK to Ireland in the case of Brexit would be more likely by investors from outside the EU and in the services sector", it adds.

The new research examines the impact of corporate taxation - and other factors - on the attractiveness of Ireland and other EU countries to FDI.

It says that on average, all else being equal, lower corporate tax rates increase the attractiveness of EU countries to FDI.

"However, over and above the effect of corporate tax rates, a number of other location characteristics are found to significantly increase countries' chances of being chosen as a location for FDI, including market size, access to the European Single Market, low production costs, high R&D capacity, as well as cultural and geographical proximity relative to investors".

Policy analysis based on these results also indicate that, assuming all other location characteristics would remain unchanged, a one percentage point increase in Ireland's corporate tax rate (from 12.5% to 13.5%) would reduce its chance to be chosen as a location from non-EU countries by 4.6%.

"Taken together, these research results indicate that a competitive corporate tax rate is a significant factor in attracting FDI to Ireland especially from countries outside the EU".

Author of the report, Dr Iulia Siedschlag, is an associate research professor with the ESRI. She told Newstalk Breakfast any small changes could hurt us.