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The Irish Independent reports that
Taoiseach Enda Kenny remains the third best-paid leader in the EU, while a
controversy over political pay is raging in Germany.
Even though Mr Kenny cut his salary by €14,000 to €200,000 upon taking office,
he is still paid more than the vast majority of EU leaders. The only leaders on
higher salaries are German chancellor Angela Merkel, who earns €250,000, and
Luxembourg's prime minister Jean-Claude Juncker, who gets €210,111.
The issue of salaries paid to EU leaders has hit the headlines because the main
challenger to Ms Merkel in the German election later this year has complained
that the salary for the job of chancellor is too low.
Ms Merkel is often described as the most powerful woman on the planet, given her
position in charge of Europe's biggest economy.
But while the salary debate continues in Germany, Mr Kenny is still on higher
wages than the leaders of other large European countries.
French president Francois Hollande is paid €179,000, British prime minister
David Cameron is paid €172,000 and Spanish prime minister Mariano Rajoy is paid
just €75,000. Italian prime minister Mario Monti has given up his entire salary.
Although Ireland is currently in a bailout programme, Mr Kenny is still being
paid more than leaders from solvent countries, such as the Netherlands
(€180,000), Finland (€129,000) and Poland (€33,367). The Cypriot president,
Demetris Christofias, who has requested a bailout for his country, is on a
salary of €158,551.
However, Mr Kenny is earning less than US President Barack Obama, who is on a
salary of $400,000 (€303,000).
The issue of the salaries paid to EU leaders has hit the headlines again due to
a controversy involving the main challenger to Ms Merkel in the German election
Social Democrat leader Peir Steinbruck complained that the job of the German
chancellor was underpaid.
"Almost every (savings) bank director in North Rhine-Westphalia earns more than
the chancellor," he said. "A chancellor of Germany earns too little, measured by
the performance they provide, in relation to other jobs with far less
But he was criticised by Germany's last Social Democrat chancellor, Gerhard
Schroder, who insisted that politicians in Germany receive an appropriate level
"I have always been able to live from my earnings as a politician," said Mr
Schroder, "and if the rewards are too low, a politician can always try some
The salary of the Taoiseach was even higher during the last Fianna Fail
administration. Before the State's banking guarantee in September 2008, the then
Taoiseach Brian Cowen was on a salary of €285,000. This was later reduced to
€228,000 and then €214,000.
Tánaiste Eamon Gilmore promised while in opposition that he would take a salary
of €190,000 if elected Taoiseach.
The Irish Independent also reports that
a raft of new levies and charges enforced from this week are set to cost
households up to €1,000 each over the full year.
Consumers are being hit with higher rail and bus fares, increased taxes on
savings, rises in car insurance for women and a hike in motor tax.
Other areas where prices are set to rise include health insurance and the
cost of a driver's licence, while later this year the new property tax kicks in.
Most of the rises are due to government decisions following the Budget last
The impact of the higher charges will be felt from January 1, in what experts
said would mean another massive strain on family finances.
Hard-pressed motorists, already reeling from high petrol and diesel prices,
have been hit with a 400pc rise in the cost of renewing a one-year driving
The cost has shot up from €5 to €25 from Tuesday. Renewing a 10-year licence
now costs €55, up from €25. This is a 120pc rise. New plastic, credit-card sized
licences are being introduced.
Motorists also face higher motor tax from this month, and those with cars
whose road tax is calculated on engine size face increases of up to €126 a year.
Cars that are taxed on emissions, which is mainly those registered since
2008, will also be hit, with increases of up to €40 a year.
Female drivers will face higher premiums after new EU rules came in last
month banning premiums being calculated on the basis of gender. This has meant
that women drivers under the age of 30 are seeing premium jumps of up to €300.
And savers will also be hit.
From the start of this month anyone with savings will now have any interest
they earn taxed at 33pc, up from 30pc. And next year all those, apart from
pensioners, will have pay-related social insurance(PRSI)
deducted also from interest earned.
Families are bracing themselves for higher health insurance premiums after a
series of price increases last year. Some 400,000 people renew their policies at
this time of year and they will be hit by a series of rises imposed last year
that average around 20pc. Bus and rail fares went up by up to 18pc from last
The scrapping of the PRSI-free allowance for workers earning more than
€18,000 will be visible on the payslips of workers at the end of the week. It
will cost workers an average of €5 per week.
The €10 cut to child benefit also came into force yesterday.
The Irish Times reports that
Tánaiste Eamon Gilmore has predicted a “post-recession” Republic will become
apparent by the end of 2013, bringing enormous potential for growth to our
Mr Gilmore believes the recession will have ended
by 2014 and that the political and economic landscape will alter radically.
As a corollary, those changes would shore up
support for the Labour Party in its Coalition with Fine Gael.
“We believe that we are now at a stage where we
can start looking forward. We have been mired in economic recession. As we move
into 2013, we will be able to look beyond that crisis.
“My parting words to the parliamentary party was
when we come back in 2013 we will need to be talking and thinking about what
post-recession Ireland will look like. I see enormous potential. The EU
presidency absolutely parallels what we are doing, concentrating on jobs and
growth and trade,” he said.
In an interview with The Irish Times, Mr Gilmore
also contended that some of the group of five TDs and one Senator expelled from
the parliamentary party since February 2011 are more comfortable in Opposition
than in Government and lack the courage to live with difficult decisions.
He dismissed any suggestion the party has been
damaged by the defections, particularly those of party chairman Colm Keaveney
and former minister of state Róisín Shortall.
Mr Gilmore said that all members of the party
were aware that when the Coalition was agreed in March 2011, Labour was facing a
Responding to criticism by the defectors, he
said: “The Labour Party and I are not going to be deflected from that. In the
midst of battle we are not going to have bouts of nervousness and second
opinions about that task.”
Asked was he surprised that the party had lost
six parliamentarians in 20 months, he replied: “There are some people in the
Labour Party who are more comfortable in Opposition than . . . Government.” He
said the overwhelming majority of the parliamentary party had the “courage and
conviction” to fulfil its mandate.
Mr Gilmore rejected suggestions of any Cabinet
reshuffle in the short term, or of him moving from foreign affairs and trade.
There have been suggestions that the portfolio was too peripheral and the leader
of the smaller party in Government needed an economic ministry. The Tánaiste
said he could think of no more central ministry than that of foreign affairs and
trade, especially over the next six months during our EU presidency.
Mr Gilmore said the big factor in 2012 in terms
of big political developments was the stability treaty referendum.
“People had the opportunity of looking at the
alternatives . . . to send the IMF home. They made the decision [to back] the
broad strategy we are pursuing.”
The second major development was over bank debt
and what he described as the Government’s “determination” to deal with the
He was confident of a deal being struck. “I
believe there is going to be a commitment and understanding in Europe that the
EU needs a winner to come out of [a bailout] programme. Ireland is the best
placed to do that.”
The Irish Times also reports that
Facebook is moving all its non-US revenues from its credits business –
understood to comprise mainly games credits – to a new Irish subsidiary,
according to accounts just filed.
Facebook Payments International Ltd was
incorporated in March 2011; accounts just filed for its operations up to
December 31st, 2011, show it did not trade during that period.
However, the accounts say the company was
established with the intention of “transitioning the Facebook credits business
from Facebook Ireland Ltd in 2012. The entity will be responsible for all
revenue and related costs of the credits business of Facebook outside of the
Facebook Ireland Ltd bills third-party customers
for targeted advertisements on its website but also earns income from a credits
system. Its revenue jumped to more than €1 billion during 2011, from just €229
million in 2010. Despite this huge revenue jump, it lost €18.37 million in 2011
before taxation, having made €1.9 million the previous year.
The main reason was the corresponding leap in
charges it had to pay to its immediate parent, Facebook Ireland Holdings, an
unlimited company owned by Facebook entities in the Cayman Islands.
Facebook Payments International is owned by
Facebook Ireland Holdings and has its registered office at 5-7 Hanover Quay,
Filings to the Securities and Exchange Commission
in the US by Facebook show that it derives a substantial amount of its revenue
from games credits by way of arrangements it has with Zynga, another
multinational with important elements of its global structure based in Ireland.
Zynga Game Ireland Ltd reported a pre-tax profit
of $4.8 million on revenues of $369 million, with the relatively small profit
arising after substantial royalty and other payments were made to other Zynga
It paid royalties of $191 million to Zynga Game
International Ltd, a Zynga subsidiary with its registered address at the offices
of AL Goodbody on North Wall Quay, Dublin. It licences the right to Zynga games
to the non-US market.
Despite having revenues of $191 million in 2011,
it reported a pre-tax loss of $35 million. The company had no employees. It paid
royalties of $50 million to its US parent and contributed to research and
development costs of $174 million, the accounts say.
The Irish Examiner reports that
from pharma to social networks and from trade to tax, companies in Ireland last
year experienced the good, the bad, and the ugly. Kyran Fitzgerald takes a look
back at the big issues that firms were faced with over the last 12 months
Ireland is one of the most trade-dependent
countries in the world and our exporters are seen as key agents in the country’s
But on occasions, the figures have flattered to deceive. This really should be
no surprise. Our economy was fuelled — indeed, rocket-fuelled — in the late
nineties and early noughties by foreign direct investment, much of it tax
The benefits of such investment are real. Just look at Westport and Kinsale, two
towns currently benefiting from major pharma industry investment projects driven
by Allergen and Eli Lilly respectively.
Our IT services sector is booming. Visit Dublin’s Grand Canal Dock or Sandyford
and you will observe young workers by their hundreds, many of them foreign.
Huge shipments of pharma products overseas have boosted the trade figures
considerably, helping the Government in its task of distinguishing the country
from other financially struggling European economies further south.
In trade terms Ireland is rocking — or so it appears. The country boasts the
highest trade surplus relative to GDP in the EU. In August, the surplus reached
an all-time high of €9.074bn, this at a time when the country’s key markets are
all either stagnating or in recession.
Irish trade figures are notoriously volatile, of course. The purchase of an
aircraft by a Dublin-based leasing company or a large merchandise shipment by a
multinational can skew matters over a monthly timeframe.
What has been of greater significance has been the transformation in our current
account position. Put simply, the current account tells us whether Ireland is
paying its way in its dealings with the rest of the world.
In the third quarter of 2012, Ireland recorded a current account surplus of
€3.05bn following a surplus of €3.235bn in the second quarter and a deficit in
the first quarter of just over €1bn.
Over the long run, current account surpluses are what really matter. A budget
surplus can arise from a frothy bubble economy, while a deficit could be largely
down to a slump in confidence and the need to pay off debt, which is the case at
We should be pleased about the current account surplus, but should beware of
getting carried away.
During 2012, discussion on two key possible weaknesses in the country’s position
moving into 2013 picked up apace.
Firstly, there was much debate about the ‘patent cliff’, the effects on the
economy as a result of products coming off patent. This began to happen in 2012
and there must be real concern that we will be faced with announcements of job
cuts this year.
Certainly, the IDA strategy of focusing on biopharma will be put to the test. To
date, the signs have been relatively positive. Let’s hope this remains the case.
Davy Stockbrokers has moved to dismiss suggestions that the patent cliff could
result in tens of billions being wiped off our export and GDP figures. It points
to the fact that many manufacturers pay out almost equally large sums in
royalties to overseas parents and affiliates.
Which brings us to the second, and perhaps more pressing point.
This is the increasing pressure coming on large IT corporates, with a big
presence in Ireland, from countries including the US, France, and,
interestingly, the UK.
Britain, our key trading partner, is now losing patience with multinationals
which engage in tax arbitrage.
The government fastened on the coffee chain Starbucks, in particular. It emerged
that the chain had paid almost no corporation tax.
This, in turn, sparked a popular outrage which did considerable damage to the
brand. The group backtracked and offered to pay some of the money. The damage
Starbucks was seen as having undercut struggling competitors through means less
fair than foul, albeit means that were perfectly legal.
The searchlights, meanwhile, have been beaming on those key players in the Irish
‘knowledge’ economy, Google and Facebook.
As reported recently, Google Ireland paid just €70m on corporation tax on sales
of €47bn over the period 2005-11.
The French government was prompted to slap a tax bill of almost €1.7bn on the
company relating to its activities there.
In truth, the behaviour of both parties is open to criticism — the French move
looks like a tariff barrier under another guise, but governments can be forgiven
for seeking to clamp down on such avoidance, particularly as they are losing out
on sales tax revenues due to the growth in online activity generally.
Google, however, employs 2,500 people in Ireland on fat salaries. It invested
€227m in three Dublin office buildings in 2011 and has just completed a €75m
Facebook employs almost 300 staff on remuneration averaging almost €60,000 a
head, yet the social networking company only paid €3m in corporation tax on
revenues of just over €1bn.
The Irish Government finds itself increasingly squeezed between key EU and
international trading and investment partners on the one hand, and a
multinational sector which is not slow to apply the pressure on the Irish State
when needs must.
It will be fascinating to see how and if the Dublin authorities can wriggle out
of this one in the years ahead.
Away from the world of transfer pricing and creative accounting, a steady
recovery is underway.
The food and drink sector is viewed as core, given it tight links to the wider
economy. A euro of food export revenue has three or four times the domestic
impact of its pharma equivalent. This has been a year of consolidation following
a year of rapid growth — over 12% — in 2011.
The visit of the newly crowned leader of China, Xi Jinping, to a farm in Clare
early in the year was a real high point.
This was followed up by a trade mission led by Agriculture Minister, Simon
Coveney. The rise and rise of Irish whiskey was another theme, along with
progress, within the dairying sector in preparing for the lifting of milk quotas
Kerry Group’s decision to establish its second global research and development&
hub near Naas was another massive development.
In March, the Research Prioritisation Group produced a major report which
identified 14 areas of priority for State-backed research, with a much greater
emphasis on research of practical commercial use.
The report was timely given the growing question marks over the efficacy of a
spend on science that reached €20bn over the past decade — one which has been
maintained in the face of cutbacks.
interesting blog post on Irisheconomy.ie entitled ‘Research Prioritisation
Report’, Aidan Kane expressed concern about the "increasingly centralised model
of state planning for innovation", which, he felt, created "further
opportunities for rent seeking by both industry and academics."
He warned of the danger of ‘group think’ and consensus seeking, one that is
contrary to the very spirit of innovation.
We arguably need a lot more such questioning.
To conclude, Irish exports ended the year on a positive note.
IIB Bank economist Austin Hughes cautiously predicts growth in volume of 3%. He
accepts that tax arbitrage makes it very difficult to find out what is going on,
but he rejects the idea that all of our recorded growth is illusory.
Against the odds, Irish firms such as Kilkenny’s Connolly Mills in China are
continuing to carve out new markets.
2013 will start off difficult. The hope is that things will ease a bit as the
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