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Friday Newspaper Review - - Irish Business News - - May 10, 2013
By Finfacts Team
May 10, 2013 - 7:35 AM
The Irish Independent reports that Social Protection
Minister Joan Burton has put the spotlight on U2's decision to move its
publishing arm to the Netherlands – as part of an attack on the "scandal" of tax
Bono and his fellow band members have come under fire from tax justice
campaigners since they made the move in 2006 to pay less tax. But Ms Burton is
the first cabinet minister to highlight U2's actions.
She criticised companies that were not paying their fair share of taxes to help
pay for essential public services.
"That's not acceptable if a huge amount of personal wealth and corporate
earnings and corporate profits are diverted in a way in which they make little
effective contribution," she said.
"The well-known example, U2, moved quite an element of its activities through
the Netherlands because clearly whatever the Netherlands was doing was far more
attractive in tax terms for their companies and for their organisations than the
quite generous arrangements that Ireland has traditionally had in the area," she
U2 moved their publishing arm to the Netherlands after the tax exemption for
artists introduced by former Taoiseach Charles Haughey was capped at €250,000.
The band had been one of the biggest beneficiaries of the scheme. Ms Burton said
that there had been reports of multi-national companies using schemes in the
Netherlands to obtain effective tax rates of 0pc to 4pc.
She made her comments at the annual conference of Chartered Accountants Ireland
in Dublin during a debate on the "two-tier" tax system.
Ms Burton – who is also a chartered accountant – said she was very interested to
hear that the G8 summit in Fermanagh would be considering the issue of
"exceptionally aggressive" tax avoidance and tax planning.
"This may inject some fresh thinking into what for citizens in many different
countries has become a scandal," she said.
She also referred to Starbucks paying an extra £20m (€23.6m) in corporation
taxes to the British Government, following revelations that it has paid no
corporation tax in the UK in the past three years.
U2 manager Paul McGuinness has previously defended the band's decision to move
its publishing arm from Ireland to the Netherlands, insisting the band is a
global business and pays taxes globally.
The Irish Independent also reports that the
controversial European Financial Transaction Tax (FTT) could make it more
expensive for the State to borrow on international money markets even though
we've opted out of the levy, the State's borrowing agency has said.
The National Treasury Management Agency (NTMA) also said the levy, which is set
to be introduced in 11 EU countries, would incentivise banks to rely on central
banks and the ECB for funding.
Irish authorities have opted out amid concerns that if we sign up to it, Irish
business could lose financial services to the City in London.
But in addition, the NTMA has said that the tax would have a negative impact
here because of the knock-on effect on the secondary bond markets.
"Although Ireland has opted not to sign up for FTT, and while primary bond
issuance by sovereigns are exempt, the tax would still be levied on routine
secondary market dealings in Irish bonds by firms in the EU 11, reducing their
liquidity and adding to the cost of funding," an NTMA spokesman said.
"The 11 countries that have signed up for FTT have recently queried the European
Commission's estimate that it would add only a small amount to debt service
costs for sovereign borrowers.
"In addition the inclusion of repo markets within the draft directive has the
potential to seriously hinder the functioning of collateral-based cash
borrowing/lending between banks, thereby incentivising the banks to rely on the
National Central Banks and the ECB who are exempt from FTT."
The UK, which is opposed to the proposal, has launched legal proceedings in a
bid to block the €35bn levy on financial transactions agreed by the 11 EU
members earlier this year.
British Prime Minister David Cameron reiterated the country's opposition
yesterday, stating the levy could damage the UK's financial services sector and
Europe's global competitiveness.
Earlier yesterday the Department of Finance told the Oireachtas Finance
Committee that Irish officials have not yet done a detailed analysis of the
potential impact on this country of the controversial levy, but that the NTMA
agreed with the UK's assessment.
"We've had preliminary soundings back that say they (the NTMA) do agree to a
large extent with what the UK authorities have been saying all along in relation
to the debt management – that there would be an impact on the secondary bond
market," Brenda McVeigh, of the Department of Finance, said.
But she said they couldn't quantify the impact.
The countries that have signed up for the FTT are Germany, France, Italy, Spain,
Portugal, Slovenia, Estonia, Belgium, Greece, Austria and Slovakia.
The EU is enabling member states that do want to introduce the tax to do so
under the "enhanced co-operation" procedure.
That allows a proposal to be adopted by a minimum of nine member states, even if
other members don't plan to do so.
The Irish Times reports that employment in the
construction sector was effectively deregulated yesterday after the Supreme
Court struck down as “unconstitutional” wage agreements involving thousands of
In a landmark ruling, the court said the system of Registered Employment
Agreements (REAs), which set minimum rates of pay and conditions in several
employment sectors, had delegated law-making powers beyond the Oireachtas.
The ruling has implications for 70,000-80,000 employees across the construction
and electrical contracting sectors whose employment terms are governed by the
agreements, as well as a smaller number of workers in the printing and drapery
The system, which has been the subject of several legal disputes in recent
years, allows employers and unions to make agreements, which when registered by
the Labour Court became legally binding on an entire sector.
‘Field of legislation’
However, the court declared the agreements had strayed “unmistakably into the
field of legislation, which was the sole preserve of the Oireachtas”.
In their ruling, the five judges said the Industrial Relations Act of 1946,
which provides for the agreements, raised serious issues of incompatibility with
The challenge to the REAs was taken by a group of electrical contractors, who
welcomed the court’s ruling, saying the decision would allow them to control
their own cost-base and secure existing jobs.
However, its full ramifications remained unclear yesterday with employers and
unions at odds over what it meant for existing employment contracts governed by
The Government said it was studying the judgment, and will take legal advice on
it before commenting in detail.
Minister for Jobs, Enterprise and Innovation Richard Bruton insisted the
existing contractual rights of workers in sectors covered by REAs were
unaffected by the ruling.
“Contractual rights can be altered only by agreement between the parties
involved,” he said.
However, the electrical contractors’ group, the NECI, said the judgment meant
all current agreements were “now cancelled”.
Ibec’s Brendan McGinty said the judgment not only raised questions as to the
legal status of recently agreed REAs, it also called into question the separate
Joint Labour Committee wage-setting system, which remains under review following
a similar High Court judgment of unconstitutionality in 2011.
The Technical, Electrical and Engineering Union said the ruling erodes existing
protection. The union’s general secretary, Eamon Devoy, said the electrical
contractors have brought about a situation whereby foreign contractors will
enter the country to undercut domestic operators.
Socialist TD Joe Higgins said the ruling will be seen by employers and
subcontractors as a signal for a savage attack on the wages and conditions of
Fianna Fáil’s spokesman on jobs and enterprise, Dara Calleary, called on the
Government for clarity .
“There is still confusion over whether those currently covered under existing
contracts will see a forced reduction in pay and conditions as a result of this
decision,” he said.
The Irish Times also reports that the outgoing
Financial Regulator, Matthew Elderfield, has warned against easing off on
regulating the financial sector in what he said was probably his last public
address in his position.
Mr Elderfield, who is moving to take up a position with Lloyds Banking Group
after the summer, took the opportunity while speaking to an insurance industry
conference in Dublin to express the view that strong banking and insurance
supervision should continue into the future.
His comments about regulation come less than a week after the deputy head of
AIB, Michael Somers, said he was “dismayed” at the number of banks in the IFSC
that had handed back their licences over the past two years and that this was
because of “heavy regulation”.
Mr Elderfield told the European Insurance Forum in Dublin yesterday that,
post-crisis, most boards and managers understood that higher standards were here
to stay and that Ireland’s reputation as a place to do business depended on
“good regulation and strong supervision”.
In a reference to the former Anglo Irish Bank chairman Seán FitzPatrick, he said
it was not too long since a banker had said that it was “time to shout stop; the
tide of regulation has gone far enough”.
At some point, the debate about over-regulation and supervision would return,
“if indeed it has ever gone away”.
This was healthy and reasonable but he hoped that debates on regulation and
supervision would be done transparently and that they would be given “short
shrift if they take place as a vaguely articulated concern about burden and
competitiveness without being grounded in specifics to ensure an informed
Mr Elderfield said it would be sensible, when the debate did resurface, to cast
a watchful eye on whether adequate resources, best practice powers and genuine
independence were being maintained “so that strong supervision survives this ebb
and flow intact, through bad times and, in the future, good ones too”.
He said concerns over the cost of maintaining a high quality supervisory staff,
including concerns over pay rates when austerity eases, should be tempered by
the terrible cost to society of financial failure.
“The €1.65 billion projected insurance scheme support for Quinn Insurance is in
the order of 80 times the current year costs of supervision of the insurance
“And the €64 billion capital investment from the taxpayer into the Irish banking
system represents a staggering 1,409 times the current year costs of banking
He said other key elements to what was required included the strong set of
powers currently being adopted in the Dáil and a supervisory philosophy that
encouraged the challenging of firms and ensured that problems were tackled
rather than allowed to fester.
The final element key for a supervisory institution was that it was truly
independent from industry and politics in the making of its supervisory
Mr Elderfield afterwards told reporters that if deals that were being offered by
banks to distressed mortgage customers, some of which involved accruing interest
on that part of the mortgage that was not being serviced, were not sustainable,
they would not be in compliance with what was required by the Central Bank.
He said the banks needed not just to reach specified targets, but had also to do
deals on terms that were sustainable.
“If we think they’re not being done on sustainable terms, we will communicate
that to them.”
He said the Government had told bank executives that their jobs were at risk if
they missed the targets on tackling distressed mortgages.
Bank chief executives were taking the targets “very seriously”, he said. “Senior
management have to really make this happen if they want to stay in their jobs.”
The Irish Examiner reports that
Ireland’s burgeoning offshore oil and gas industry has the potential to produce
between 10,000 and 15,000 jobs per year and substantially increase the
exchequer’s annual corporate tax take; but only if some existing barriers to
entry for overseas players are removed, according to a new report.
The ‘Making the Most of our Natural Resources’ study — undertaken by
PricewaterhouseCoopers (PwC) and commissioned by Providence Resources — claims
that, with the right supporting conditions in place, if Ireland were to have 10
commercial Barryroe-style fields in operation, an average of 13,500 jobs could
be maintained per year, during the average 10-year development phase, with
11,500 a year produced during the average 25-year production phase.
PwC also claims, in the newly published report, that even a single producing
field, such as Barryroe, could bring in about €4.5bn in corporate tax and profit
resource rent tax over its lifespan; which would equate to the Government’s
total corporate tax take in 2011.
However, despite ExxonMobil beginning drilling off the west coast and a host of
smaller independent international explorers increasingly looking at Irish
waters, the report suggests more needs to be done in order to unlock the true
potential of the industry here and attract more overseas players.
“Ireland is underperforming, relative to other European players, in the
attraction of exploration investment from the oil and gas industry. This
underperformance is partially attributable to factors beyond the control of
policymakers, but there are important policy contributors. The oil and gas
industry has the potential to transform local and national economies, but a
critical mass of activity is needed before a substantial indigenous supply base
can develop,” the study noted.
Ireland’s tax regime is seen as being “relatively favourable” compared to
high-production countries, but its performance, in terms of commercial
discoveries, remains weak, and the demand for licences is modest, PwC suggests.
It added that Ireland is still seen as a less attractive location, by foreign
explorers, than the likes of Britain and Norway, both of which have higher
headline tax rates.
Also commenting, Providence Resources chief executive, Tony O’Reilly Jr, said
that the report shows that if Ireland is to successfully exploit its hydrocarbon
potential, “continued and significant foreign direct investment will be
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