The key drivers of economic growth in Ireland in the past decade and a half, though, must be recognised as the Republic’s membership of the EU (with all of the aid and trade benefits that come with such a position), the government’s targeting of foreign direct investment as one of its main priorities, and last but by no means least, the decision to reduce the corporate tax rate to 12.5% (and until recent years, 10% in various locations, such as the International Financial Services Centre).

All of these factors have, for the most part, combined to ensure Ireland’s position as the resident EU success story. However, there are now fears that the tiger may be losing its teeth for good, a fate that the Irish authorities are understandably keen to avoid.

In the light of the general economic malaise currently being felt worldwide, the Irish government’s recent announcement that its finances are in worse shape than had previously been thought does not come as much of a surprise. At the end of July, the Irish authorities predicted that whole year tax receipts would fall below budget estimates by around EUR3bn; but new figures for the year to the end of August suggested that the shortfall is likely to be far more substantial, in the region of EUR5bn. Declining VAT revenues as a result of weaker consumer spending, and lower capital gains tax revenue, due to the ailing property market are thought to be contributing to the budget shortfall.

Facing a deteriorating economic climate and falling tax revenues, the Irish government subsequently announced that it would bring forward the date of this year's budget announcement from December to October, meaning that Finance Minister Brian Lenihan will now announce the budget on October 14. The government hopes that such a decisive move will "give clarity and confidence to investors and taxpayers alike," and provide a sound basis for economic recovery.

"The emerging scale of the economic and fiscal and environmental challenges now facing the country require that the government take the necessary decisions to ensure stability in the public finances, while giving firm support for those aspects of the economy which are continuing to perform strongly, and ensuring that Ireland benefits as early and as fully as possible from improved international economic conditions," it stated.

"Taking decisive action now is critical to our future sustainable growth," commented Lenihan, observing that: "We are better placed than most economies to meet the challenges ahead with our low debt rate, our educated and young workforce, and our low tax environment for workers and business."

So, what are the contributing factors to this sudden fall from grace, aside from the general economic situation?

Some commentators point to relatively poor infrastructure (outside of Dublin), rising inflation, and high public expenditure, but it is surely the entry of several Eastern European ‘new kids on the block’ to the European Union that has done the Celtic Tiger the most damage, attracting investment away from Ireland with the promise of lower wages, and in the case of 2007 EU entrant Bulgaria, a planned 10% flat tax. Estonia is another frequently cited example of successful flat tax reforms, and Slovakia and Romania are also among the flat tax countries now nipping at Ireland’s heels, not to mention Cyprus, which also has a rock-bottom 10% tax rate.

Aside from the initiatives aimed at "encouraging investment and activity and deepening Ireland’s competitiveness" that the Irish authorities assure the population are to be announced in the coming weeks and months, and tax changes to be unveiled in the 2009 budget next month that are already "well advanced", what should the government do in order to reassert the jurisdiction’s position as Europe’s big cat?

In its economic assessment of the Republic earlier this year, the Organisation for Economic Cooperation and Development (OECD) highlighted the need to raise productivity growth as a key long-term challenge to the Irish economy, and argued that wage moderation is needed to avoid a weakening of export performance. In commenting on the Republic's fiscal position, the OECD further noted that the rate of public spending needs to slow, and that it is important not to lock-in expensive spending commitments.

Businesses located in the RoI, meanwhile, stress the importance of maintaining the low corporate tax rate for which Ireland has become noted, and which, if no longer unique to the country, or even the most attractive rate going, is still significantly lower than many of the other ‘old’ EU members.

This position was highlighted by Intel's Vice-President of Finance and Enterprise and Director of Global Tax and Trade, Nanci Palmintere, when she delivered the keynote speech at the 17th Annual Tax Research Network (TRN) Conference, held at the National University of Ireland, Galway (NUI Galway) last week.

Addressing delegates on the subject of ‘Tax and Business Aspects of Site Selection’, Ms Palmintere explained that although other factors come into play when multinationals consider where to locate their operations, such as the presence of a skilled workforce, transport infrastructure, land availability, and business costs, tax levels are a key consideration. Warning the Irish authorities against any form of tax harmonisation, she further observed that: "There needs to be consistency and transparency in the operating conditions."

Perhaps, overall, the Irish need not be too worried. Surely they have to apply the brakes to the runaway public spending which seemed so easy to finance during the golden years, but the usps of low taxation and a well-educated, English-speaking work-force will remain a magnet for US companies seeking to set up European HQs. The only alternative, the UK, is entering a long period of over-taxed economic difficulty. Far from attracting new investment, the UK government seems powerless to stop a gradual drift of companies across the Irish Sea and in the wrong direction. One recent refugee from the Treasury's clammy embrace, pharmaceutical FTSE100 Shire Group said last month that it was very happy in Ireland and had no intention whatsoever of returning to the UK.