Ireland’s Profits Look Extraordinary — But It’s the Balance Sheet, Not the Real Economy, Doing the Work
Aidan Regan is professor at University College Dublin, School of Politics and International Relations
Cross-posted from Democracy Challenged
Photo: Creative Commons Attribution-Share Alike 3.0 Unported license
Profit shares are supposed to tell a simple story: when a business produces something, how much of the value created ends up as profit rather than wages? It’s a basic income-distribution measure, comparing the slice of national output that rewards capital versus labour. Eurostat calculates it by dividing the gross operating surplus — profit before interest and income taxes — by gross value added. If a company produces €100 of value and pays €60 in wages plus €5 in production taxes, the remainder — €35 — is profit. In that example, the profit share is 35 per cent.
Across the EU, this ratio is generally stable. For the past decade, the average hovered around 40 per cent. France sits even lower at 32.2 per cent, Germany at 37.2 per cent, Spain at 39.0 per cent. Italy is the only large economy above the EU mean. Nothing especially exciting here: different economic structures produce different distributions, but always within a fairly narrow band.
And then there is Ireland.
Eurostat reports that in 2024 the profit share of Irish non-financial corporations reached 75 per cent. Almost three-quarters of all value added generated by Irish-based businesses is booked as profit. The next-highest country, Malta, is back at 56.5 per cent. France doesn’t even reach half of Ireland’s level. At first glance, one might conclude that Ireland’s corporate sector is extraordinarily profitable. The numbers appear to suggest a business model where wages are a marginal cost and profit is the main event.
But this reading is wrong. The Irish number reflects Ireland’s role in global profit shifting, not in domestic wealth creation. Ireland is not a country where production generates astonishing returns; it is a country where US multinational companies route astonishing returns — generated elsewhere — through Irish subsidiaries.
The key is intangible assets. Many US tech and pharmaceutical groups hold their intellectual property (licences) in Ireland. When global sales of software, digital services, or patented medicines take place, the revenue is often booked through an Irish entity that owns the licence. A billion-euro licensing operation may employ a few hundred people, or even a few dozen. Production doesn’t scale with employment. Payroll barely moves. Profits explode.
With that in mind, the Eurostat figure makes sense. The Irish corporate sector looks profit-heavy because the “value added” being measured includes profits that originate globally but are legally recognised in Ireland. Meanwhile, the domestic wage bill stays relatively small. In accounting terms, Ireland is punching far above its weight — not because of real economic muscle, but through the art of accounting, with balance sheets rather than workers doing the heavy lifting.
A simplified example shows the mechanism. Suppose an Irish subsidiary of a multinational books €1 billion in value from global IP sales. Perhaps €100 million goes to employee wages and €10 million to taxes. That leaves €890 million as gross operating surplus. Profit share: 89 per cent. No exploitation required. The numbers inflate themselves.
This is why Ireland consistently registers as an outlier in European economic data. Measures of investment, profitability, GDP and productivity are all skewed by the accounting treatment of intangible assets held by multinationals. When IP rights — effectively the licence to harvest global revenue — are onshored to Ireland, national accounts record the transfer as if new productive capacity has been built. Yet what has actually changed is ownership, not output.
None of this means Ireland isn’t successful at what it does. The country built a legal–tax–regulatory regime that attracts global IP and, in return, it receives jobs, investment and soaring tax receipts. But when you see Eurostat’s headline figure — a 75 per cent profit share — understand what you are looking at. Not a productivity revolution. Not an Irish corporate miracle. Just global profits finding a home.
Ireland is profitable because it is where so much of US multinationals’ profits are booked.
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