Irish residents have 1250 billion in overseas investment or do they?

Irish investment by country CSOEarlier in the week I turned a fairly obscure CSO report from last week into a brief article for the WSM web site.  On first reading the report seems to say that people living in Ireland have 1250 billion invested in bonds, stocks and shares overseas.  This is 25 times the cost of the NAMA bailout so certainly appears to represent an alternative way to pay for NAMA then shutting down much of the health and education system.  After some discussion on Facebook and researching online I'm not quite so sure what this figure represents anymore, I added a final paragraph to the article to flag that.  The article is below, I've a few more comments on the process around it afterwards.

The Irish rich aren't broke - they are worth 1250 billion in overseas investment alone

A CSO report from 2009 revealed that Irish residents own 1251 billion euro worth of foreign stocks and bonds. Over 300 billion of this is invested in the US and 240 billion on Britain. These figures are for stocks and bonds only, they don't include other wealth that Irish residents hold abroad, for instance in the form of property. (Image: from the CSO report).

Reacting to these startling figures Andrew Flood of the WSM said "For months as the government have slashed the wages, social welfare and public services of ordinary working people we have been told that there is no alternative. Those of us who have demanded that the richest 1% must carry the cost of the capitalist crisis have been told this is impossible because they have lost their money. These figures show that this is a lie, that there is in fact a huge pool of wealth held by Irish residents. This is all the more remarkable when you realize that the figures must exclude the wealth of the so called tax exiles, that section of the incredibly rich who make sure to spend a least 6 months outside the country to avoid being liable for tax here. It is also very possible that some of this wealth is controlled by the same developers who claim to be bankrupt and who are dumping 50 billion of their debt on us through NAMA."

The CSO report can be read in full as a PDF online. The CSO emphasized that "Overall, the data are compatible in form and content with the data submitted to the International Monetary Fund (IMF) as part of Ireland’s ongoing participation in the IMF’s world-wide annual Coordinated Portfolio Investment Survey" and "with the portfolio investment stock statistics published on the 8th October 2010 in the Release International Investment Position – 31 December 2009."

Update: There is confusion over what exactly this figure measures as it is 10 times that reported in the Bank of Ireland 'Wealth of the Nation' report from 2008 which claimed "The asset base (excluding residential property) of the top 1% of the population increased by €14bn to €100bn, an increase of 16%."  But it is also considerably lower than the funds held by IFSC companies who might claim to be resident for tax purposes, according to the Irish Times "In 2008, 8,000 funds were located in the IFSC, with €1,560 billion of assets."  In all cases it is still apparent that the richest 1% still own a vast amount of wealth.

First published on WSM.ie


So what does this number represent? There are a number of possibilities I can think of.  It may be that the BoI report only counted the wealth that BoI could see and excluded overseas wealth.  Given the habit of the Irish wealthy to hide their money off shore to avoid paying tax, see for instance the Ansbacher scandal, I'd be reluctant to rule this out.  But this number seems very big, ten times the BoI estimate and as it doesn't say otherwise I'd presume the BoI estimate includes the multiple members of the richest 1% who are tax 'exiles' (ie take ultra long holidays) whereas the CSO use of 'resident' would seem to exclude them.  The number is also huge given that the BoI report revealed that "At the end of 2005, the total amount of Irish household assets stood at €796 billion." Could the wealthy 1% really have over 50% of the total wealth. 

Another possibility is that this number includes the overseas investments of pension funds, pension funds are a smart way for the super wealthy to avoid taxes as contributions are deductable. But no according to Business & Finance the total value of defined pension schemes is 45 billion, way short of that.  A figure to keep in mind BTW next time someone tries to tell you that the rich don't really exist because all the stock is held by pension schemes, thats less than 50% of the assets of the top 1% from that BoI report.

So the mystery remains and illustrates the dangers of dabbling in economics.  But still better to highlight that there is some story out there rather than stay silent for fear of this sort of misreading.  Oh did you like the bit where I quote myself?  Articles are meant to have quotations right!

Comments

could this be employees'

could this be employees' stock options ?

>So what does this number

>So what does this number represent?

From the CSO PDF, it's negotiable instruments (equities, bonds, funds) - not debts, unpaid invoices, etc etc - owned by Residents. This includes individuals and companies.

It's distributed like this - EU : 36.9%, US: 24.5%, UK : 19.2%

For the US and UK, the numbers reflect approx 10% of the total market capitalisation (!).

The variations year-to-year of US and UK numbers could equally well be explained by variations in market value and exchange rates, as movements of funds.

Hi Andrew. Yeah when i first

Hi Andrew. Yeah when i first came across this and flagged it, it just seemed a crazy figure. I'd imagine that it does include all state and private pension investments. Would be great if we could break this down further.

  


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