Announcements about technical redundancies are piling up. We’ve had Meta, Stripe, Twitter, Zendesk, Amazon, Wayflyer, and there’s still a chance something from Intel could bring costs down globally.
It’s not a disaster but everyone is a little nervous about how far it could go.
The nervousness is particularly reflected in reports that executives of major companies are being love-bombed by government officials who want to meet up and ask if there is anything they can do.
It is no surprise that most of the headlines have been caused by job loss decisions by multinational companies. Small Irish companies could have downsized quietly and we wouldn’t even know it.
The fact that even the most profitable companies are shedding jobs begs the question of how we should respond.
The government may feel that this is an external correction and that our strategy for the technology sector is all right, whether it’s attracting more FDI projects or facilitating growth for domestic technology startups.
Alternatively, the government could take the opportunity to reassess our policies for both sectors. It seems it’s planning something in between – making some tweaks to the enterprise white paper that’s slated for release next month.
Ireland can’t really give more tax breaks to FDI projects
There are a number of issues here. Our corporate policies regarding both foreign direct investment and indigenous investment have been solid and very successful. The bigger problems lie in the ability of business and society to handle more business and economic development.
Some of the major challenges facing the country, which feed directly into the technology sector, include housing, energy policy and infrastructure, water infrastructure and planning.
It would take more than adjustments in a business white paper to fix them. The government will argue that it has the policy in its hands to solve these big problems, and it does. Unfortunately, this is all progressing much too slowly.
Aside from the general structural issues that would probably have prevented much more development in the technology sector anyway, the white paper will look at more specific areas.
The topics of tax breaks, corporate tax, awareness raising and cooperation with the EU as well as training and investment will be discussed.
Ireland can’t really give more tax breaks to FDI projects. On the domestic business side, there could be tax incentives to encourage more investment in start-up tech companies.
For example, angel investors can currently get a 40 percent tax break on what they invest in tin. Put €100,000 into a tech startup and get a €40,000 tax check.
But angel investing is risky, and on average, these “angels” back nearly five companies each.
There are qualification restrictions and this is where we could see some new relaxation on which companies can be part of the Employment and Investment Incentive Scheme (EIIS).
There’s one other important question that needs to be asked before the government offers more tax breaks for high net worth individuals amid a cost-of-living crisis.
Why do tech companies let people go in the first place? Elon Musk has partially laid off half of the Twitter workforce for overpaying for the deal. It’s already losing money and, with $5 billion in sales, is no longer a startup.
Of much greater concern, Amazon, Meta, and Stripe have all pointed to a slowdown in either digital revenue or e-commerce, which isn’t growing as fast as they expected. These are both fundamental underlying industry challenges that are not company specific.
Improvements in corporate policy for FDI or Irish startups will not change this.
Smaller tech firms have slowed their hiring policies because, for the first time, their investors are sitting on holdings that are worth less than they paid for them.
They want to know what their money is being spent on and when they will get something back. If we have a knee-jerk policy response to multinationals in the face of job losses, we must ask what we want to create in their place.
Once these Irish companies reach a certain scale, they tend to sell
A vibrant indigenous technology sector is highly desirable. But we already have one. Once these Irish companies reach a certain size, they tend to sell to larger international companies anyway. The best become part of foreign multinationals far too early.
The best the government can do is stick with the plan that has already delivered results. But it needs to be more active. Government agencies not only have to work hard during difficult times to market Ireland abroad, but also to keep in touch with business leaders who are already here.
Smaller domestic companies have not received their fair share of public contracts either in Ireland or at EU level. The State should review its domestic procurement policies and also ensure that Irish companies are best placed to maximize public sector procurement abroad.
If better tax breaks lead to more investment and more jobs, then we should be open to it. However, if the problem is a global market downturn, it seems unlikely that tax breaks for investors will make a meaningful difference on the jobs front in the near term.
Another aspect to local business development here is making Ireland an attractive place for people from abroad to set up a business.
I recently spoke to another Irish entrepreneur who went to Berlin to start his food service business. The German city has become an international magnet for innovative foodservice startups. We have no equivalent.
The white paper will likely be more cosmetic than truly radical. The major problems of competitiveness, housing, energy and infrastructure will remain.
https://www.independent.ie/business/irish/policy-fixes-for-housing-skills-and-energy-are-better-for-the-tech-sector-than-subsidies-42150266.html Political solutions for housing, skills and energy are better for the technology sector than subsidies