Rovio Entertainment LTD, the development company responsible for the immensely popular iPhone game Angry Birds are currently considering relocating from its native Finland to Ireland. Chief executive Mikael Hed explained that “the Irish authorities have been very active and we have been promoting that. We are considering it. It is something that we need to look at. For now we have stayed in Finland, but it is on top of our minds.” Should this move be successful, Rovio Entertainment will follow in the footsteps of game changing giants Facebook, Google and Apple who have developed strong links to Ireland, moving offices and headquarters. It appears a trend has developed, one in which Ireland has emerged as a hub for all aspects of computer programming and development. This is a trend many people are watching with baited breath. Many questions can arise to the validity of this trend; its longevity and ultimately Ireland’s future as a necessary component of the global technology industry.
Due to Ireland’s strategic location at the doorstep of Europe, an assortment of large companies have invested in developing links here. Apple’s actions in the 1980s seem to have acted as a precursor to today’s growing computer culture. According to Tim Jenkins, an Apple European finance manager until 1994, they created a tax structure known as “The Double Irish”, enabling the company to move profits into tax havens around the world. Two Irish subsidiaries were created, in conjunction with the then government, allowing tax breaks in exchange for a steady supply of jobs to the local economy. Whilst wholly beneficial for Ireland’s fledgling computer programming community, the largest advantage was for Apple itself, following an arrangement that allowed Apple to send royalties on patents developed in California to Ireland. The transfer was internal, and simply moved funds from one part of the company to a subsidiary overseas. But as a result, some profits were taxed at the Irish rate of approximately 12.5 per cent, rather than at the American statutory rate of thirty-five per cent. In 2004, Ireland, a nation of less than five million, was home to more than one-third of Apple’s worldwide revenues, according to company filings.
The key role Ireland plays in Facebook’s drive to reduce its tax bill is made clear in the prospectus it submitted to the Securities and Exchange Commission in preparation for its flotation on the New York Stock Exchange. The flotation could raise 10 billion dollars or more. “The material jurisdictions in which we are subject to potential examination by taxing authorities include the United States and Ireland,” the corporation declared in its prospectus. The Internal Revenue Service in the US is examining Facebook’s tax assessments for 2010 and 2011, while all tax years since 2008 remain subject to examination by the Irish tax authorities, according to the prospectus. The taxation of multinationals has always been a difficult task because of the need to estimate the contribution made by particular activities in particular jurisdictions to a multinational’s overall annual profits. The task has been made much more complicated by technological changes over the past two decades and the increased sale of products and services over the internet.
Regardless of the debate over the perhaps convoluted reasoning behind multinationals’ decision to settle in Ireland, it can be argued that due to the involvement of such companies, the technology sector evident in Ireland today has evolved and grown in a positive light. Start up companies such as Red Wind Software represent the passion and raw talent developers in Ireland have for the industry, whilst Popcap Games highlights a smaller company that with the aid of IDA has thoroughly exceeded expectations, becoming a European base for the native Seattle company. Once more, education must be highlighted to resolve the issue of Ireland’s future. While the quality of Irish graduates is often internationally lauded, there has been a lack of suitably qualified science and engineering graduates; further to that there have been concerns expressed by Intel and other US Multinationals about grade inflation which places a consequent question mark over the quality of Irish Science and Technology graduates. If grade inflation is the case, it is not a tenable corrective measure. Furthermore, the tendency of Irish graduates to be truly fluent in just English (Only eight per cent of Irish secondary school students learn two or more foreign languages compared with the European average of sixty per cent) often disqualifies them from working in multinationals that use Ireland as the base of their operations for Europe, The Middle East and Africa. Irish educational institutions have in the past worked closely with multinationals to identify employability criteria. This should continue, but should also encompass the requirements of our indigenous digital industries. One home grown success which has been impacted by the shortcomings of Irish graduates is the technology company: Havok. In a September 2008 interview with Siliconrepublic.com, Chief Executive, David O’Meara, stated that a shortfall of quality graduates led to the company establishing overseas operations in Calcutta and Munich in order to get its hands on the quality it needs. To quote IBEC Head of Education Policy, Tony Donohue, “Employers and educators have a critical role to play both in addressing these skills gaps and bridging the gap between education and employment. This can be achieved through work placements and greater links between business and higher education in areas such as curriculum development. In this way employers will get an opportunity to shape the learning that will help to drive economic recovery.”