Intangible assets of multinational enterprises in Ireland and their impact on euro area activity
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수요일, 6월 12, 2024
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In euro area countries other than Ireland, estimates point to IPP transfers having a relatively limited impact on overall country-level output for the present, and little effect on euro area GDP or its expenditure components.
Key Points:
- In euro area countries other than Ireland, estimates point to IPP transfers having a relatively limited impact on overall country-level output for the present, and little effect on euro area GDP or its expenditure components.
- Transfers of intangible assets to and from Ireland have caused significant volatility in the expenditure components of euro area GDP.
- These effects have propelled Ireland from a weight of approximately 1% of euro area GDP in 1999 to around 5% by 2023.
- The euro area current account and capital stock are also affected by MNE activities (see Section 4).
- Complementing the headline series with these smoother modified series facilitates economic assessment of the euro area (see Section 5).
- ECB Occasional Paper Series No 350 5 1 Introduction Multinational Enterprises (MNEs) have become an increasingly important feature of the euro area economy.
- In addition, the profits of some of the world?s largest MNEs derive mainly from intangible assets (software, patents and other IPPs).
- Most of this increase is driven by global corporations across a wide range of sectors with head offices that are established outside the euro area.
- For some countries, such as Slovakia, MNE activity is mostly driven by companies headquartered in other euro area countries, while Ireland stands out with the highest share of MNEs with headquarters outside the euro area.
- ECB Occasional Paper Series No 350 7 Chart 1 Non-domestic MNE share of output across euro area countries (percentages of gross national output) 2019 2005 intra euro area intra euro area 45 40 35 30 25 20 15 10 5 0 EA IE LU SK MT NL SI BE EE LV AT LT PT DE ES FI IT FR CY GR Sources: Organization for Economic Co-operation and Development ? Activity of Multinational Enterprises (OECD AMNE) database and own calculations.
- Intra-euro area refers to production in the respective country by firms headquartered in another euro area country.
- While intangible assets are an important factor in production in knowledge-intensive industries, they also play a pivotal role in the tax-optimisation activities of MNEs.
- By transferring such assets to countries with an attractive corporate tax system, MNEs can reduce the tax burden on income streams they derive from these assets.
- Chief among these, in terms of their effect on euro area measures of output, is the classification of R&D as capital formation of IPPs.
- ECB Occasional Paper Series No 350 9 3 MNE activities across euro area countries with area-wide impacts MNE activities may have a disproportionate impact on national output, especially for smaller countries.
- First, intangible investment and imports of R&D services, reflecting the growing importance of intangible assets and the relative ease with which these can be relocated across borders (see Section 2).
- For instance, the share of IPPs to GDP is larger in Ireland and Malta, as well as in France14 and Austria, than in the euro area as a whole (Chart 3).
- Merchanting as a share of GDP is also relatively high in Ireland, Luxembourg and Cyprus.15 MNE activities in Ireland are reviewed in detail in the sub-section below.
- 17 In Ireland, the CSO reports that ?beginning in 2008 [?], a number of multinational corporations relocated their group headquarters to Ireland.
- Over time, the onshoring of intangible assets has boosted Ireland?s GDP by generating large exports highly concentrated with certain firms.
- The grey range shows the minimum and maximum values for the four largest euro area countries, namely Germany, France, Italy and Spain.
- Chart 12 Contribution of Ireland to changes in euro area real GDP (cumulated increases in euro area GDP from Q4 2014 to Q4 2023 in ? trillions) Euro area Euro area excluding Ireland Ireland 8 7 6 5 4 3 2 1 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 Sources: Eurostat and own calculations.
- 4.3 Impact on the euro area current account Cross-border production arrangements and merchanting activities related to MNEs affect the trade balance in the euro area current account (see Box 1).
- Notes: The green area is the net exports of the euro area as recorded in trade statistics.
- ECB Occasional Paper Series No 350 22 Impact on euro area capital stock 4.4 Intangible asset transfers also affect euro area capital stock.
- Andersson, M., Byrne, S., Emter, L., Gonzalez, B. and Jarvis, V. (2023), ?Intangible assets of multinational enterprises in Ireland and their impact on euro area GDP?, Economic Bulletin, Issue 3, European Central Bank, Frankfurt am Main.
- (2021), ?The euro area capital stock since the beginning of the COVID19 pandemic?, Economic Bulletin, Issue 2, European Central Bank, Frankfurt am Main.