Front Matter Page

IMF Country Report No. 18/195

IRELAND

SELECTED ISSUES

June 2018

This Selected Issues paper on Ireland was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on June 12, 2018.

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© 2018 International Monetary Fund

Front Matter Page

IRELAND

SELECTED ISSUES

June 11, 2018

Approved By

European Department

Contents

• BUSINESS CYCLE IN IRELAND: ACCOUNTING FOR OPEN LABOR MARKET AND MULTINATIONALS

• A. Introduction

• B. Equilibrium in a Small Open Labor Market

• C. Potential Output of a Globally-Integrated Economy

• D. The Implied Business Cycle Position

• References

• FIGURES

• 1. Labor Market

• 2. Weakened Cyclical Signals

• 3. Stochastic Trends

• 4. Unemployment Rates

• 5. Labor Market Gaps

• 6. Wage Growth Decomposition

• 7. GDP Growth Contributions

• 8. Potential Growth

• 9. Potential Growth Decomposition

• 10. Output Gap Estimates

• 11. Output Gap Decomposition

• TABLES

• 1. Trend and Cycle Estimation

• 2. Wage Phillips Curve Estimation

• 3. Structural Multivariate Filter

• THE IMPACT OF INTERNATIONAL TAX REFORMS ON IRELAND

• A. Introduction

• B. Foreign Investment in Ireland

• C. Ireland’s CIT regime

• D. Corporation Tax Revenues

• E. The U.S. Tax Reform

• F. OECD/G-20 BEPS

• G. EU Anti-Tax Avoidance Directives

• H. Digital Taxation

• I. CCCTB

• J. Conclusions and Policy implications

• References

• FIGURES

• 1. Inbound and Outbound FDI Stocks and CIT Rate

• 2. FDI Stocks, 2016

• 3. Foreign Direct Investment

• 4. Overall Statutory Rates

• 5. Corporation Tax Revenues

• 6. U.S. MNE’s Fiscal Relevance in Selected Host Countries

• 7. Corporate Income Tax Performance, 2016

• 8. Corporate Tax and Gross Operating Surplus, 2016

• 9. Wages, 2016

• 10. U.S. MNE’s Affiliates–Value Added per Employee

• 11. U.S. MNE’s Affiliates–Total Assets per Employee

• 12. Percentage Change in FDI Stock and CIT Revenue from U.S. Tax Reform

• 13. Irish Revenue Structure vs. OECD Europe, 2016

• TABLES

• 1. Irish Affiliates of U.S. MNEs

• 2. Parameters for TCJA Impact Assessment

• ANNEX

• I. Tax-Minimizing Structures

• THE IRISH COMMERCIAL REAL ESTATE MARKET: SYNCHRONIZATION AND THE ROLE OF EXTERNAL FACTORS

• A. Introduction

• B. CRE Investment and Financing: Some Stylized Facts

• C. The Co-movement of Ireland’s CRE Return with Peers

• D. The Determinants of Synchronization in the CRE Markets

• E. The Sensitivity of Irish CRE Prices to Changes in International CRE Prices

• F. Key Takeaways and Policy Implications

• References

• FIGURES

• 1. CRE Return and Domestic Economic Activity

• 2. CRE Returns

• 3. Ireland’s CRE Market: Selected Indicators

• 4. Bank CRE Lending

• 5. CRE Market: Composition of Investors

• 6. CRE Market: Investment, Take Up, and Vacancy

• 7. CRE Return Volatility

• 8. CRE Return and Synchronization Indicators

• 9. CRE Return Synchronization with Other Regions

• 10. CRE Return Synchronization

• 11. CRE Prices Growth

• 12. Impulse Response Functions

• TABLES

• 1. Summary Statistics

• 2. CRE’s Total Return: Determinants of Synchronization

• ANNEX

• I. Determinants of Synchronization

• II. Summary Statistics: VAR Endogenous Variables