The Republic of Ireland, which until recently had one of the worst standards of living in Europe, experienced a period of tremendous growth throughout the 1990s and early 2000s that revolutionized their economy and society, transforming their country into the “Celtic Tiger”. Much of this growth was due to foreign multi-national corporations (MNCs) investing in the Irish economy. This study examines the potential reasons behind the increase in foreign direct investment (FDI) inflows and determines that it was primarily due to Ireland’s reduction in corporate tax rates between 1987 and 2003. However, other determinants of national advantage such as education and infrastructure factors were also important in attracting FDI. In addition, decreasing corporate tax rates has been shown to increase FDI in industrialized countries at a rate of about four percent increase in FDI to every one percent decrease in the corporate tax rate. While many consider this a prime way to boost economic growth, there are also potential negative effects such as a race to the bottom. This should be considered when attempting to pursue such a strategy.
"Ireland: A Study in the Effectiveness of Corporate Tax Rate Reduction,"
Journal of Interdisciplinary Undergraduate Research: Vol. 11, Article 3.
Available at: https://knowledge.e.southern.edu/jiur/vol11/iss1/3