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News : Irish Last Updated: Dec 4, 2012 - 9:12 AM


Tuesday Newspaper Review - Irish Business News and International Stories - - December 04, 2012
By Finfacts Team
Dec 4, 2012 - 9:08 AM

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The Irish Independent reports that motor tax on the average family car will climb to more than €500 for the first time in tomorrow's Budget – an increase of €36.

And drivers of eco-friendly cars with the lowest emissions will see their annual bill go up by at least €40, the Irish Independent has learned.

Green motorists are being hit with far steeper hikes, as the Government tries to close the gap created when the tax bands were changed to reward low-emission cars.

But there will still be some incentive for people to buy green cars, as cars with lower emissions will still pay substantially less motor tax.

Also among the painful measures in tomorrow's Budget are dole cuts for some people who have been without a job for just six months.

And there are expected to be reductions in the back-to-school allowance, plus carer's and education payments.

The full raft of welfare cuts being proposed by Social Protection Minister Joan Burton are revealed in a confidential cabinet document seen by the Irish Independent.

The Labour Party deputy leader also wants to clamp down on welfare fraud and has tabled a menu of savage cuts to rein in spending in her department by €435m.

However, cuts to the budgets of the Department of Health and the Department of Social Protection are being reduced by €150m each, giving ministers James Reilly and Ms Burton more wriggle room.

The €300m reduction came about after efforts by Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin to find money elsewhere.

As revealed in yesterday's Irish Independent, the Government is expected to use the extra cash from millionaires' mansions to reduce the property tax for owners of ordinary homes. The change is set to cut the property tax bill for the average house by €30 from €300 to €270.

The new rates expected are a base rate of 0.18pc – slightly down from 0.2pc – with a new higher rate of 0.25pc on houses valued at more than a €1m.

Changes to the motor tax bands will also be revealed tomorrow. The current system taxes cars registered after 2008 on their emissions count, while vehicles before that are taxed on engine size.

Four out of five motorists are still paying under the old system but the emissions-based system has led to a massive shortfall in motor tax, which the Government is trying to make up.

Those with pre-2008 cars face an average 7pc hike, while those on the new system will be paying at least 20pc more.

Sources have confirmed the exact increase for the most common family car, a 1.6 litre engine, will be a jump from €478 to €514. Those with two-litre engines will fork out an extra €50, with their annual cost increasing from €660 to €710.

The Irish Independent first revealed the Government had targeted motor tax for an additional €150m, or a 15pc increase, last month. However, drivers of eco-friendly cars will be hit with the steepest rates increase. Someone on the new system with the lowest A emission rating will see their annual tax jump from €160 to €200.

This takes in a broad range of cars, with the BMW 520d diesel costing more than €45,000, and the Toyota Yaris (€15,000).

But it will be even more of a burden for cars on higher emissions bands. Most motorists who own a car registered after 2008 fall into the second and third emissions bands, B and C, and pay €225 and €330 in tax.

There will also be a shake-up of the entire motor tax system, which the Government hopes will help close the gap created over the past four years.

Some 90pc of all new cars bought since 2008 have fallen into the lower three tax bands, leading revenue falling to €988m last year, a reduction of €72m since 2008.

The Irish Independent also reports that Michael Noonan, finance minister  has opened a third front in his long battle to secure a better deal from Europe on the cost of the EU-IMF bailout, amid signs that more countries are now backing Ireland.

But efforts to renegotiate the bailout will be hard-fought, after France and Germany quickly moved to shoot down the idea yesterday.

And Jean-Claude Juncker, chairman of the Eurogroup finance ministers, later dampened hopes of any quick deal for Ireland similar to Greece's.

He said: "I don't think the Eurogroup is prepared to give equally similar treatment to [Ireland and Portugal] when it comes to the detailed discussions taken as far as Greece is concerned."

Mr Noonan is already in talks aimed at getting a deal from Europe to cut the €64bn cost of rescuing the Irish banks with officials from the European Central Bank (ECB) and the European Commission. Those talks are due to finish before Christmas.

Now, Mr Noonan says Ireland could also seek concessions from Europe on the terms of the current bailout deal itself.

That could include being given longer to repay some of the €67bn of rescue loans and interest "holidays" to ease the annual cost of servicing the massive rescue loans.

It came after Greece secured significantly better terms on its bailout loans yesterday.

In Brussels, the finance minister said he was studying the Greek deal to see what it might mean for us.

"We'll examine every element of it to see if there is anything in it applicable to Ireland."

Ireland's debt burden is sustainable, the minister insisted, but the scale of the debt burden is also a drag on economic growth.

Mr Noonan said he was interested in anything in the Greek deal that could help ease country's return to borrowing on the bond markets at the end of next year.

Sources at the Department of Finance said one idea now being considered was the possibility of a temporary "interest holiday" on the bailout debt.

Not having to service the debt for a period of five to six years would lower than annual cost of running the State.

It would also give investors in the bond market confidence that Ireland could comfortably service new borrowings.

However, sources said the Government would weigh the potential gains from any new concessions against the burden of storing up debt for longer.

It's not yet clear whether the latest concession for Greece comes with strings attached, such as greater supervision of its budgets.

Germany and France were at pains to say yesterday that Ireland and Portugal are different to Greece, but there has been support from other sources to a new deal on Irish debt.

Portugal also wants a new deal while Finnish finance minister Jutta Urpilainen said last week that she was ready to consider lengthening loan maturities for Ireland and Portugal if requested.

"From the fairness point of view, it would be understandable to give some kind of relief to them," she added. Finland has long been an opponent of further bailouts.

Her Dutch counterpart also seemed to share the view although Dutch Prime Minister Mark Rutte has since ruled out a new deal for Ireland and Portugal.

The Irish Times reports that the new property tax to be announced in tomorrow’s budget will be reduced slightly as a result of the late addition of the so-called mansion tax for properties worth over €1 million.

Government sources yesterday confirmed that the levying of a higher tax rate on high-value properties will have a knock-on effect for middle and lower income households but conceded it would be marginal. The rate to be unveiled by Minister for Finance Michael Noonan tomorrow is expected to be 0.18 per cent of the value of the property, with a rate of 0.25 per cent for properties worth over €1 million.

The new rate would mean a tax bill of €450 per annum for a house worth €250,000 as opposed to €500 if the rate were 0.2 per cent.

The new tax will yield some €250 million for the exchequer in 2013 after it is introduced in July, and €500 million in a full year.

Some Fine Gael Dublin backbench TDs said homeowners in the capital would be more adversely affected by the tax. Mary Mitchell O’Connor from Dun Laoghaire and Olivia Mitchell from Dublin South said they had a huge number of representations from homeowners who had ordinary properties, were in negative equity, but would still face steep property taxes.

Unfair 

Ms Mitchell O’Connor said the way the tax was being designed was unfair and “outrageous” and she would continue to lobby Mr Noonan.

While most of the €3.5 billion in adjustments were signed off by Cabinet after a fraught meeting on Saturday, negotiations involving the two biggest spending departments, Health and Social Protection, were continuing last night, as Minister for Public Expenditure Brendan Howlin attempted to finalise the adjustments .

Government sources confirmed the targeted cuts for both departments had been reduced by €150 million each. The target for cuts in Social Protection has been reduced from €540 to €390 million, while the overall adjustment in Health will be €780 million, down from €920 million. Mr Howlin and Mr Noonan have found savings elsewhere and the more modest targets will allow both Ministers, Joan Burton and James Reilly, to row back from making the most severe cuts.

Mr Noonan dismissed reports of acute strain between the Coalition parties over tomorrow’s budget, saying most of the plan had been agreed for weeks.

‘Not true’ 

“I don’t know who is writing those headlines but it’s just not true. Relationships are very good,” Mr Noonan told reporters in Brussels.

“The debate on Saturday was about the last €100 million or so out of an adjustment of €3.5 billion and there are different takes on it, different opinions and different political assessments on what should be in a tax package or what should be in an expenditure control package.

“But it’s around the margins, the main thrust of the budget has been agreed for some weeks.”

Backbench TDs from both Coalition parties voiced discontent about various aspects of the budget. A number of Labour TDs expressed disappointment that there would be no increase in the universal social charge for those earning over €100,000.

The Irish Times also reports that US securities firm Cantor Fitzgerald has completed the long-mooted takeover of Irish stockbroker Dolmen. It plans to create at least 200 jobs and intends applying to be a primary dealer in Irish government debt.

The amount paid for the Irish broker has not been disclosed. The main beneficiaries are the firm’s chief executive, Ronan Reid, and director Gerardine Jones, who combined own close to 50 per cent of the firm. The others to benefit from the deal are director Paul McGowan; Garrett Kelleher, a shareholder and property developer whose bank debts are in the National Asset Management Agency; and 10 staff.

Cantor’s takeover of Dolmen, which has been the subject of discussions for about a year, is the first Irish acquisition by the firm, which plans to apply to be a primary dealer in government bonds in Ireland.

“We are looking to be the number one fixed-income dealer in Ireland in a relatively short period of time,” Shawn Matthews, chief executive of Cantor Fitzgerald Co, the company’s brokerage and investment bank arm, told Bloomberg. “We are still aggressively looking to expand. I can see us adding at least 200 people over the next year.”

Mr Reid told The Irish Times Cantor was attracted to Dolmen’s trading business in the secondary bond markets and to its stockbroking and private client business.

The 17-year-old firm was close to break-even in 2011, he said, and would return to profitability this year on estimated revenue of about €14 million.

Dolmen still lags rival stockbroking firms Davy and Goodbody in bond trading and general stockbroking business.

Mr Reid said Cantor’s interest is to grow the business to compete with Davy, which is owned by management and staff, and Goodbody, which is owned by Kerry-based financial services company Fexco.

9/11 attacks 

Cantor Fitzgerald is the firm that suffered most casualties in the the 9/11 attacks on the World Trade Centre in New York. The firm lost 658 of the 960 staff in its Manhattan offices that day.

The acquisition is the latest development in a stockbroking market that has undergone major consolidation in recent years following a heavy fall in share trading during the crash. South African bank Investec bought NCB Stockbrokers in June. Rival broker Bloxham was put into liquidation in May over accounting irregularities.

The Irish Examiner reports that emerging markets such as China, South Africa, Nigeria and Russia are playing a growing role in Irish food and drink exports growth, according to Bord Bia research.

During 2011, trade to China increased by 47%, South Africa by 43%, Nigeria by 38% and Russia by 30%. Bord Bia’s emerging markets manager, Breiffini Kennedy, says this growth is being driven by enhanced consumer purchasing power and greater urbanisation in these markets.

Mr Kennedy said: "These trends stimulate investment from retailers as they seek to secure market share and first mover advantage in emerging markets. Key areas of investment for retailers include new store openings and storage and logistic solutions.

"African markets in particular are attracting increased attention from leading international and regional retailers. KFC’s success in China and focus on Africa is an interesting example. For instance, Yum! Brands business development plans in Africa set out the objective of securing ‘major growth’ in the continent from their base of over 650 stores in South Africa."

The Bord Bia analyst stated that, during 2011, Yum! launched in new markets such as Zambia, Ghana and Kenya with plans to roll out to seven new markets this year. Yum! aims to have a presence in 20 African markets by the end of 2012.

"Yum! Brands view emerging markets as key to their future growth, but they are not alone," Breiffini Kennedy stated.

"Regional players such as Shoprite are also looking to expand from South Africa into other African markets. Shoprite recently opened their sixth outlet in Nigeria, and Africa’s largest retailer has a footprint in 17 African markets, with Zambia and Namibia the largest markets outside of South Africa."

Mr Kennedy added: "Multinational food companies and retailers are moving swiftly to ensure they secure the new opportunities which emerging markets offer. This momentum will ensure emerging markets continue to play an important role in the growth of Irish food and drink exports."

Meanwhile, a recent report by Rabobank suggests that it is not too late for US and European processed food brands to enter the Chinese market. Rabobank& suggests that effective distribution strategies are critical to Western food processing companies successfully winning customers in the Chinese market.

The bank’s report found that the annual growth in some areas of the country at 10%, with an overall growth of 150% in the last decade.

Among the indicators of growth potential, Rabo cites Chinese consumption of confectionery of less than 1.2kg per person annually. The current global average stands at 2.1kg per person, suggesting considerable additional room for growth.

Nick McIlroy in Bord Bia’s Shanghai office stated: "Confectionery is typically consumed during the festive gifting seasons around Chinese New Year. Rabobank suggests that the key for foreign brands entering this market can be "distilled down to tactics applied for specific sizes of cities within the country".

"With a number of Western confectioners having established a presence in Tier 1 cities such as Shanghai and Beijing where distribution networks are more formalised, the report suggests that specific distribution strategies for smaller cities may prove fruitful for Western processed food brands which are perceived as higher quality products, attracting a premium from consumers."

Foreign news reviews and more comprehensive coverage of Irish news is available in our Daily News Digest in the Global category on Finfacts Premium.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.


© Copyright 2011 by Finfacts.com

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