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Ireland GDP per capita is among the highest in the OECD, though this is partly due to the activities of multinational enterprises (MNEs) upwardly influencing GDP. Excluding these activities, GDP per capita was still above the average of the upper half of OECD countries. Strong post-crisis labour productivity growth has largely relied on MNEs. Both employment and working hours have recovered in recent years but remain below the pre-crisis level. Inequality in household disposable income is below the OECD average. Ireland’s income redistribution system reduces market income inequality by the largest margin in the OECD, essentially through welltargeted social benefits in particular toward the poorest of the population. Greenhouse gas emissions per capita remain well above the OECD average. Good progress has been achieved on all 2017 priorities. Notably, the Integrated Licence Application Service reduces significantly the complexity of regulatory procedures. The Legal Services Regulation Act, if fully implemented, will enhance competition and increase transparency in legal services. Fostering innovation and removing barriers to entrepreneurship and competition would encourage a more dynamic and cost-competitive domestic business sector, making economic growth more sustainable. Enhancing activation policies and revamping the welfare and tax system to get more people back to work would help both employment growth and social cohesion. Growth performance, inequality and environment indicators: Ireland C. GDP per capita is among the highest in the OECD
A. Growth Average annual growth rates (%) GDP per capita Labour utilisation of which: Labour force participation rate Employment rate1 Employment coefficient2 Labour productivity of which: Capital deepening Total factor productivity Dependency ratio
2002-08 1.2 0.7 0.9 -0.4 0.1 0.4 1.3 -0.9 0.1
2012-18 7.7 2.5 0.5 1.8 0.1 5.4 3.0 2.4 -0.3
GHG emissions per capita4 (tonnes of CO2 equivalent) GHG emissions per unit of GDP4 (kg of CO2 equivalent per USD) Share in global GHG emissions4 (%) * OECD simple average (weighted average for emissions data)
GDP per capita
40
GDP per hour worked
30 20 10
B. Inequality and environment
Gini coefficient3 Share of national disposable income held by the poorest 20%
Gap to the upper half of OECD countries5 Per cent 50
Level
Annual variation (percentage points)
2015 29.7 (31.7)*
2013-15 -0.5 (0)*
8.4 (7.6)*
0.1 (0)*
2016 14 (10.9)* 0.2 (0.3)* 0.1
Average of levels 2010-16 13.8 (11.3)* 0.3 (0.3)* 0.1
0 -10 -20 -30 -40
Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases. StatLink 2 https://doi.org/10.1787/888933955028
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Policy indicators: Ireland A. Value-added tax collection is low
B. Marginal labour tax wedges are high for low income families
VAT revenue ratio,¹ 2016
Percentage of total labour compensation,2 2018
80
0.6
70
0.5
60 0.4
50 40
0.3
30
0.2
20 0.1 0
10 IRELAND
Advanced economies
IRELAND
EU
Advanced economies
EU
0
Source: Panel A: OECD (2018), Consumption Tax Trends 2018: VAT/GST and Excise Rates, Trends and Policy Issues, Consumption Tax Trends; Panel B: OECD, Taxing Wages Database. StatLink 2 https://doi.org/10.1787/888933955902
Beyond GDP per capita: Ireland A. Inequality is at the advanced economies' median Gini coefficient, 2016 or last available year¹ SVK, 24.1
IRELAND, 29.7 ZAF, 63.0
Advanced economies median, 29.7
Emerging economies median, 46.2
B. Exposure to fine particulate matter is very low Percentage of population exposed to PM2.5, 20172 % IRELAND
Advanced economies
< 10 μg/m³ 10-35 μg/m³
Emerging economies
> 35 μg/m³
World 0
10
20
30
40
50
60
70
80
90
100
Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database. Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter. StatLink 2 https://doi.org/10.1787/888933956776
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Ireland: Going for Growth 2019 priorities Enhancing activation policies. The employment rate remains low, in particular among the less-well educated, which should be addressed by effective labour market programmes.
Actions taken: SOLAS – the agency in charge of Further Education and Training – has been strengthening training programmes along with the Further Education and Training Strategy 2014-2019, with a focus on providing fundamental skills to hard-to-place unemployed people. The agency is developing the Programme and Learner Support System, which will collect data on the beneficiaries in order to monitor how they progress after the programme.
Recommendations: Continue the strategy of profiling unemployed people and of evaluating programmes. Increase resources to the programmes that are found to be effective, making full use of the new information system for training programmes. Enforce the obligations of the unemployed effectively, by defining more specifically the wage and contract types of the suitable job offer the beneficiaries have to accept.
Reform the tax and welfare system. The share of low-income households remaining inactive is high, due to the high average effective tax rates and high childcare costs. Addressing some aspects of Ireland’s tax system which both narrow the tax base and distort the efficient allocation of resources would improve public finances.
Actions taken: The Housing Assistance Payment (HAP) was expanded in early 2017, allowing the beneficiaries to work full-time and to keep their housing support. Marginal tax rates for low-paid workers were somewhat alleviated by reducing the Universal Social Charge – an income levy funding the social security system – over the past two years.
Recommendations: Make all social benefits conditional on earnings, not employment status, and withdraw them more gradually as earnings rise. Ensure the introduction of the Single Affordable Childcare Scheme. Reduce the number of VAT rates. Reassess property values more regularly for the purposes of calculating local property tax.
Strengthen competition in non-manufacturing sectors. Competition in some service sectors including utilities, transport, the legal profession and ports remains relatively weak, hindering the growth of young and innovative firms.
Actions taken: A number of actions to enhance competition prescribed in the 2015 Legal Services Regulations Act were adopted in 2018, such as the introduction of limited liability partnerships.
Recommendations: Improve competition among the legal professions, including through the creation of multi-disciplinary practices and the introduction of the profession of conveyancer. Shorten lease periods for port terminal operators and issue more stevedoring licences.
Enhance R&D spending and innovation. Research and development capacity of local firms is weak, reducing their ability to innovate and hampering the diffusion of new technologies. Public support for business research and development is heavily skewed towards tax incentives.
Actions taken: A number of actions in Innovation 2020, including public investment programmes to support enterprise R&D, have been initiated since its launch in December 2015 and continue to progress.
Recommendations: Rebalance innovation support toward direct grants. Continue the strategy of building up fewer, larger academic research centres, and ensure strong linkages with firms, including MNEs.
ď ź 171 Reduce barriers to entrepreneurship. Entrepreneurial activity, as measured by entry and exit rates, is low. The regulation of licence and permits required to start and operate a business is relatively restrictive, while costs of business failure are high. ď&#x201A;ˇ
Actions taken: The Integrated Licence Application Service (ILAS), launched in early 2016, has been developed, enabling businesses to apply for, renew and pay for licences provided through this on-line system.
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Recommendations: Reduce the administrative burden to obtain permits and licences for startups by fully developing the ILAS, including achieving a full up-take. Reduce the price of construction permits and registration of property charged by the relevant authorities. Introduce guidelines for banks that specify circumstances under which personal guarantees from business owners should not be sought.