Originally published on Law360

Patrick's Day festivities have shown, there are few countries with which the U.S. has such a strong and enduring bond. Certainly, much of this is based on history, culture and shared values. However, the links between the U.S. and Ireland are about far more than a green milkshake on March 17.

As President Obama told the Irish head of state Enda Kenny earlier this month, the U.S. is "continuing to identify and describe additional areas where we can strengthen (the) strong economic bonds" between the two countries.

In monetary terms, these bonds are already incredibly strong. U.S. companies have a collective stock of foreign direct investment in Ireland of almost $200 billion, a figure which exceeds the combined investment from the U.S. in all of the BRIC countries. The output of U.S. companies based in Ireland represents over 25 percent of total Irish GDP, with approximately 600 U.S.-owned businesses employing around 100,000 people.

So why is Ireland so attractive for U.S. investors? According to a report carried out by the Economist Intelligence Unit (EIU), four key factors emerge.

The first of these is Ireland's gateway proposition. As a small country on the periphery of Europe, Ireland's physical market is relatively small. However, as a means of providing an access point into the EU internal market — the world's largest economy — Ireland is the best in its class.

For example, 46 percent of the respondents to the EIU study said that Ireland's gateway offering was a key competitive advantage, with market access arguably the single most important motivation for corporations looking to invest outside of their home jurisdiction.

The second factor is tax. Ireland's 12.5 percent corporate tax rate has been its calling card internationally for many years. However, as the EIU report shows, from a foreign direct investment (FDI) perspective, it is just one aspect of a much broader pro-enterprise corporate tax infrastructure.

This includes double tax treaties (Ireland currently has treaties with 65 countries); transfer pricing and R&D tax credits. In relation to intellectual property, for example, deductions for acquisition costs can reduce the effective tax rate further, making Ireland even more attractive from an R&D and innovation perspective.

Again, as with the overall findings of the report, the crucial aspect in relation to tax is that it is the wider corporate tax infrastructure, and not the 12.5 percent rate alone, which makes Ireland attractive.

For example, other European jurisdictions have reduced their headline and effective corporation tax rates in recent years, with the U.K. the latest to cut its standard rate of business tax.

However, when Ireland's overall tax offering is considered, along with the fact that the Irish government has always provided consistency and certainty of treatment to investors in this regard, it is clear that the whole picture is far greater than the sum of all its parts.

In many respects, the importance of certainty of treatment is also a key element to the other "cornerstones" identified by the EIU. This leads to the third factor identified in the EIU study, where 30 percent of respondents said that Ireland's legal and fiscal stability was a key competitive advantage, with 50 percent saying that political stability was "very significant" when it came to FDI decisions.

Even more resoundingly, 87 percent of those who took part in the study said that fiscal certainty was important to them when they were considering making an investment.

These responses highlight a number of key factors.

Firstly, as concerned as most U.S. investors are about the Eurozone instability, there is recognition at a global level that Ireland has taken the right steps in its recovery plan.

Secondly, it demonstrates the importance of a strong track record. Unsurprisingly, corporations making multimillion or billion-dollar investments are generally risk averse.

As such, the initial Irish success of FDI pioneers such as Microsoft, Abbott and Google, gave confidence to the next generation of technology and pharma companies that Ireland could live up to (and exceed) the promises it made to investors.

This is a question of trust, certainly. It is also very much about reaching a critical mass, which encourages potential investors to choose one jurisdiction over another.

Ireland, for example, is now home to eight of the 10 largest pharmaceutical companies in the world, while the "cluster" of ICT firms includes names such as IBM, EMC, Cisco, Oracle, Facebook and Twitter.

As these larger clusters develop, a number of smaller, more niche industries are now reaching a similar scale. In gaming, EA, Blizzard, Riot Games, PopCap and Zynga now have operations in Ireland, with this, in turn, creating a network of support companies which feeds further growth.

The fourth and final cornerstone of Ireland's FDI proposition, outlined in the EIU study, is talent. Corporations and financial institutions looking to set up new operations want to know that a) they will be able to access a talented pool of staff and b) their senior-level executives will be willing to relocate to run their overseas operations.

Here, the combination of local and imported talent is crucial. Ireland's base of indigenous, flexible and educated workers has played an important role in attracting investment from the some of the top Fortune 500 companies.

However, particularly when specialized skills or language requirements exist, being able to draw upon a base of workers from across the European Union (as a result of open labor markets) is essential.

Then there is the question of personal tax. The EIU report shows that high tax rates for top earners can act as a significant disincentive to relocation, with Ireland losing some of its competitiveness here in recent years.

However, the introduction of the Special Assignee Relief Programme (SARP), which provides an exemption of 30 percent of income between €75,000 and €500,000 for employees assigned to work in Ireland, demonstrates the Irish government's commitment to addressing this issue.

The key point here is that the Irish government is, and must be, genuinely committed to focusing on Ireland's source of competitive advantage. This, in a nutshell, means building on the "strong economic bonds" that President Obama has highlighted, and addressing any barriers or blockages that exist to the further development of these links.

With U.S. investment in Ireland reaching record levels in 2011, the strength of these bonds clearly continues to grow. Improving Ireland's attractiveness as an FDI destination can only help to strengthen them further.

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