Grand Canal Docks, Dublin, Ireland
Momentum: Dublin’s ‘Silicon Docks’ are home to many of the world’s biggest names in global technology © Alamy

Dozens of giant light-sticks illuminate the path to Dublin’s Grand Canal Theatre at night, glowing red and flashing in dazzling rhythms. Landscape architect Martha Schwartz’s “neon red carpet” offers a new kind of Irish welcome. It announces to visitors they have arrived somewhere bold and modern: Dublin’s “Silicon Docks”.

Many of the biggest names in global technology now call the docks their European home and the area is the most visible sign of the government’s red carpet strategy for high-tech investment.

The combination of low taxes, a well educated English-speaking workforce and a vibrant tech ecosystem has long proven to be alluring. IDA Ireland, the state body charged with attracting foreign investment, has been wooing foreign pharmaceutical and technology firms since the 1950s.

“We didn’t develop this overnight, but we’ve had huge success in recent months and years,” says Martin Shanahan, the IDA’s new chief executive, who predicts the sector will create an additional 45,000 jobs by 2018.

IBM opened an Irish operation in 1956, Pfizer arrived in 1969 and Intel in 1989. By 2007, tour guides could tell visitors that Ireland was the world’s largest exporter of software and Viagra.

The investors of the early years have now been joined by second-generation web companies such as Facebook, Google and Twitter. It is an impressive list for a city that has established itself as a global tech hub and is struggling to build enough offices.

But Ireland’s investment model has come under attack for allowing companies such as Google to avoid paying tax on much of their profits. The most notorious trick is the “double Irish”, where companies exploit differences in international tax codes, funnelling profits out of Ireland and into tax havens where they hold intellectual property. The European Commission is also investigating Apple’s tax arrangements to see whether the company received special treatment from revenue authorities.

Michael Noonan, Ireland’s finance minister, moved to phase out the “double Irish” in last week’s budget, but told Irish MPs that the headline 12.5 per cent corporate tax rate “never has been and never will be up for discussion” and would not change.

John FitzGerald, research professor at the Economic and Social Research Institute, says the focus on tax misses many of the reasons why companies have based themselves in Ireland.

“The situation is more competitive now – the UK corporate tax rate is now 20 per cent – so the benefit is more limited,” he says.

“You can set yourself up in Estonia or Slovakia and pay less corporate tax than in Ireland, so there have to be other reasons for Ireland’s success,” he adds. “It’s a combination of skills, flexibility in the economy and so on.”

Mr Shanahan agrees. “To simplify this as just about tax is an error and misunderstands what Ireland is doing. You walk around Dublin and you see a vibrant, attractive city. The clustering effect from companies that want to be co-located is very important. ”

Near the neon red carpet, Facebook’s Europe, Middle East and Asia headquarters employs 500 people. Sonia Flynn, head of Facebook Ireland, suggests the office could double its current size. “Dublin is our largest office outside California. We have teams here on engineering, IT, marketing, sales and finance,” she says.

Ms Flynn, who was headhunted from Google’s European HQ across the canal, says Dublin had already created a vibrant tech ecosystem by the time Facebook opened there.

“When Facebook looked at Ireland as a location, our people were struck by the wealth of experienced leadership and talent. The local talent really shone through and that made it easy to set up quickly.”

For some, the presence of tech behemoths such as Facebook is a mixed blessing. Younger start-ups can struggle to compete for skilled labour. Early-stage start-ups rarely turn profits, so do not benefit from the tax regime.

But William McQuillan, a partner at Frontline Ventures, a venture capital fund, says that Dublin’s tech ecosystem is nonetheless spinning off plenty of innovative companies.

“The larger companies upskill the local population in developing, managing and selling tech and they also bring in international talent. People come here, they get a girlfriend or boyfriend and after a few years they settle down. Many of them eventually set up their own companies,” he says.

Brett Meyers arrived from Australia in 2000 to work in finance before founding CurrencyFair – a currency exchange website that processes €5m worth of transactions a day. The company is on course to grow fivefold by 2015, he says. Mr Meyers has been impressed by how Dublin has embraced tech innovation.

“Once you have a base of start-ups and resources, it creates a community and that attracts more people to do this kind of work. Dublin has got momentum now and there’s a multiplier effect,” he says.

“Over time, you get people exiting from successful tech companies. Then, they can go on and invest and mentor new Irish start-ups. I’m seeing it every day and that makes me very optimistic about the city’s tech scene,” he adds.

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