Foreign Risk Capital in Ireland


Foreign Risk CapitalThat wonderful image of a tourist asking for directions from an Irish rural resident. “Well to get to Listowel, luv, I wouldn’t shtart from here…”

We used tax incentives and low cost educated english speaking employees to attract FDI. Now we need a much more refined solution for a much more complex opportunity. If we expect our “Smart Economy” to get Ireland out of the mess it is in, practical alternatives are needed.

Chris Horn in his Sunday Business Post article and his blog refer to Foreign Risk Capital being needed and should be encouraged is absolutely right. This is our way out if we have the vision to implement the necessary steps to encourage more of it to come to Ireland. FRC providers would fall over themselves to get here if the environment and opportunities exist. What is needed is to create reasons for FRC to come here.

To achieve it we must start from some other point than just making it attractive. Attractive is an abstract without detail and focus. A comment that is nothing more than useless rhetoric.

  1. We need to fight and bid for risk projects to be located, or relocate here.
  2. We provide package deal projects for risk capital to participate in those projects.
  3. We must sell those projects or syndicate them to FRC providers.

In fact Ireland becoming the equivalent of a Corporate Finance operation for innovative projects is a logical evolution of the IDA.

Royalty tax incentives on patented products developed here by subsidiaries of foreign owned companies. Write-off tax incentives for up-front investment allowing for risk, so instead of grants, allow 125% of risk capital against taxable corporate income for 10 years and allow tax free bonuses to be paid from royalty receipts for patent owners.

These are opportunities outside of the corporation tax net that should not pose any significant threat to tax revenues if they are wealth and job creators. Their only effect is to encourage higher value employees that can be attracted to Ireland, contribute greatly to the economy and directly and indirectly help to grow the Smart Economy from within.

The IDA has a role, not just in attracting FDI with incentives as a tax funnel for call centres and pill producing low-cost and highly mobile production plants. The Taskforce recommendations to Government due in January 2010 will have many good recommendations to provide a green and smart economy. Let’s hope the government have the courage and vision and are “Smart” enough to implement many of them.

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