Last week the Irish Government said it will maintain the tax rate and outlined a four-year plan to save €14bn by instead reducing spending on social welfare 14 per cent, cutting 24,750 public sector jobs and lowering the minimum wage by €1 an hour.
The move fits with comments by Trade minister Batt O’Keeffee on Tuesday 23 who said keeping the 12.5 corporate levy, which is the lowest of its kind in Europe, is key to attracting R&D investment and an important driver of Ireland’s economic recovery.
And, while the measures have been criticised by opposition parties, trade unions and demonstrators in Dublin last weekend, they appear to have met with the requirements of EU finance ministers who approved the bailout plan on Saturday.
US drug major Pfizer was also quick to welcome the Government's tax commitment telling in-Pharmatechnologist that: “The corporation tax rate is critical to Ireland's economic recovery and sustaining and winning new investments.”
“The clarity which has been emerging today around Ireland’s four-year plan is helpful, because it addresses much of the uncertainty that has been clouding international perceptions of Ireland in recent months.”
A company spokeswoman suggested that maintaining the competitiveness of Ireland’s ‘real economy’, which she defined as the manufacturing and trade sectors, is critical to the country’s future economic health.
“Ultimately, it is the success of the real economy which will solve the problems in the national debt, the banks and public finances” she explained, asserting that the pharmaceutical manufacturing industry’s “contribution economically and in societal terms is immense.
“It’s also a sector which is still growing; €350m was invested by pharma companies in Ireland in 2009 with new investments in 2010 announced by MSD, GE Healthcare, Eli Lilly, Merit Medical, Biotrin among others.”
These thoughts were echoed by Irish Pharmaceutical Healthcare Association (IPHA) spokesman Ronan Collins who told in-Pharmatechnologist the tax plan and wider budget are good for the industry and the economy
“The international research-based pharmaceutical industry in Ireland welcomes any measures that will help to stabilise the Irish economy and get it back toward sustainable growth.”
Collins also stressed the contribution made by the drug manufacturing sector to Ireland’s economy and its role as a “base from which Ireland is going to bounce back to sustainable growth.”
He went on to explain that the sector currently makes up 50 per cent of the country’s exports and contributes around €3bn a year in taxes at the current corporate rate.
Collins also revealed that sector “has invested over €7bn in Ireland over the last ten years and according to IDA Ireland the replacement value of the investment by the pharmaceutical sector in the Irish economy is over €40bn.”
Maintenance of the pharma-favourable tax rate is in stark contrast with recent developments in rival drug making hub Puerto Rico, which last month announced plans to increase levies on multinational firms that outsourcing manufacturing to the country.