Ireland has retained its position as the world's fifth-freest economy, and the second most free in the EU after Luxembourg, according to the 2004 Index of Economic Freedom, compiled jointly by the Wall Street Journal and the Heritage Foundation.
Ireland's 12.5 per cent corporate rate "beats the EU average of 30 per cent by a wide margin, and makes the Celtic Tiger a major draw for US investment," wrote Ms Mary Anastasia O'Grady, one of the authors of the annual index which was published yesterday.
The top five places in the survey remain unchanged, with Hong Kong the most free economy, followed by Singapore, New Zealand, Luxembourg and Ireland.
The UK improved from ninth to seventh place, but under the Bush Administration the United States has become less free, slipping from sixth to 10th position, mainly due to the burgeoning deficit.
The world's fastest liberated economy in the last year was the Slovak Republic which improved from 66th place to 35th because of "reduced taxes, liberalised prices, accelerated pace of privatisation and restructured banking sector." While maintaining its position, Ireland's score of 1.74 in a range of 0 (best) to 5, based on a survey of all sectors ranging from trade and government intervention to banking and property rights, was 0.01 worse than last year, mainly due to slippage in the "informal market" or black economy.
The index noted that Ireland is a "modern, highly industrialised economy" that has grown by 80 per cent in real terms over the past decade and now has GDP per capita 122 per cent of the EU average. "Ireland has one of the world's most pro-business environments, especially for foreign businesses and foreign investment," it said.
"The Ahern government lowered the Irish corporate tax rate from 16 per cent to 12.5 per cent in January 2003, far below the EU average of 30 per cent. Not surprisingly, Ireland has become a major centre for US investment in Europe, especially for the computer, software, and engineering industries. Although accounting for 1 per cent of the euro-zone market, it receives nearly one-third of US investment in the EU.
"Given Ireland's extensive social welfare system, US employers find that the marginal cost of employing workers is high, though less expensive than in the major western European states," it says.
It noted, however, that there were "pressures to harmonise the Irish economy with the more statist economic ethos found in continental Europe. A relatively weaker budgetary position requires that previously unsustainable levels of growth in government expenditure be curtailed."
The survey concluded that "Ireland's policy framework promotes an open and competitive business environment. Regulations are applied uniformly and are not particularly onerous" and "corruption is not a serious problem for investors".
