The Irish Independent reports that British tax
authorities have criticised Bank of Ireland for "a flawed attempt to exploit
what it thought was a loophole" in the UK tax system.
The partially state-owned bank is being forced to pay £30m (€35m) in tax on a
£90m profit linked to its Bristol & West subsidiary in the UK.
In a strongly worded statement, HM Revenue & Customs (HMRC), the UK tax
authority, said Bank of Ireland had lost an attempt to avoid paying the tax.
The case itself dates back to 2003. It arose out of Bank of Ireland's
transfer of a "swap contract" between its Bristol & West unit and another Bank
of Ireland subsidiary.
A "swap" is a contract used by banks and business to manage the risks on
All sides agreed that the swap was originally entered into for commercial
reasons. It netted a £90m profit for Bank of Ireland that tax authorities said
resulted in a £30m tax liability.
The bank argued that it did not owe £30m because the original swap held by
Bristol & West had been cancelled and replaced by a new one.
The case finally went to a public tax tribunal, an independent legal process
that decides on tax cases, in March this year. The tribunal upheld the HMRC's
case and says that the tax is owed.
A spokesman for the tax authority in the UK said the case was a "major win".
Bank of Ireland has 56 days to appeal the tribunal's decision.
A spokeswoman for the bank declined to comment.
"HMRC will challenge avoidance schemes that risk denying the Exchequer vital
tax revenues and will pursue to litigation when necessary," the UK's exchequer
secretary David Gauke said.
Mr Gauke is a
Party MP and the equivalent of a junior minister in the UK's coalition
government. He has been an outspoken critic of tax avoidance as well as tax
evasion in the past.
Last year, he outlined new proposals to counter "aggressive" tax avoidance
schemes which are legal but are frowned on for seeking to minimise the amount
that the authorities take in in taxes.
Bank of Ireland's UK tax bill comes ahead of its annual general meeting (AGM)
of shareholders today in Dublin.
The bank will release a trading update to coincide with the event.
It is expected to confirm that Bank of Ireland is in the best shape of any
of the main Irish banks.
Margins at the bank are improving, thanks in part to the
controversial decision to increase the interest rate that UK customers pay
on their tracker mortgages. The end of the bank guarantee that banks had to
pay for will boost that trend further.
In terms of mortgage arrears, Bank of Ireland is in better shape
than its rivals.
One big question that remains ahead of today's meeting is how the
bank plans to meet the Government's demand for savings of around 6pc in its
The State owns 15pc of bank of Ireland, but Finance Minister
Michael Noonan will abstain in a vote on directors' pay at today's AGM. The
minister said he will not vote to support directors' pay until the bank
produced a wage-saving plan.
The Irish Independent also reports that an average of five businesses a day are still going bust in Ireland – but the
rate of collapse has eased, according to new figures.
Data from business intelligence group Vision-Net shows that 533 companies
have collapsed into insolvency so far this year. But that is 20pc fewer than in
the same period in 2012.
This is probably due to weaker firms having already gone to the wall while
more resilient ones manage to weather the continuing economic storm.
The Vision-Net figures show that 68pc, or 361, of the insolvencies recorded
so far this year have been liquidations. This compares to 400 firms that went
into liquidation in the corresponding period in 2012.
There have been just 17 court-ordered liquidations so far in 2013, down from
33 in the first part of 2012. The number of receiverships notched up this year
has fallen by a third, to 162. High-profile receiverships included Post
Publications, the publisher of the 'Sunday Business Post'.
The number of examinerships recorded is 10, including the Irish arm of DIY
The process for engaging in the examinership process is being eased, making
it more accessible to SMEs, said Vision-net.
Companies that can satisfy two out of three conditions related to turnover,
employee numbers and the size of the balance sheet won't have to apply to the
High Court to engage in the process.
Vision-Net also said that a total of €131.9m in commercial and consumer
judgments had been awarded already this year, or an average of €76,875 per
Amongst the biggest were a €198,000 judgment secured against Kill
International Equestrian Centre and €146,713 against Sligo firm O'Hargill
The top judgment secured against consumers was one for €2m. The top 10
judgments secured against individuals in the past two weeks alone have totalled
The Irish Times reports that
Taoiseach Enda Kenny has said he expects a response within a fortnight to an
initiative by the Government to engage with trade unions on plans to cut the
public service pay and pensions bill.
Minister for Public Expenditure and Reform Brendan Howlin said last night that
the Government wanted to work with trade unions that wanted to work with it.
However, he warned that time for further talks was running out.
Following the rejection last week of the Croke Park II proposals, the Cabinet
yesterday asked the chief executive of the Labour Relations Commission Kieran
Mulvey “to make contact with the parties in the coming days to establish whether
or not there is a basis for a negotiated agreement”.
The Government said it had reaffirmed its requirement to generate savings of
€300 million on the pay and pension bill this year and €1 billion by 2015.
In the Dáil last night, Mr Howlin again defended the measures in the proposed
Croke Park II deal which were rejected by trade union members last week.
He said the public finances remained in a perilous position.
He suggested that if the Government was a private sector employer “there would
be a lot of jobs at stake”.
Mr Howlin said that Mr Mulvey would make contact
with the parties and see whether there was a basis for a further engagement that
might lead to an agreement.
“He will do that exploration over the coming days with both sides, and report in
time to allow for a further discussion and decision by Government in a
fortnight’s time. The Government is certainly willing to talk to staff
representatives who are prepared to reach a realistic compromise with the
Government on how to make these savings. The reality of the budgetary timetable
is such that time for any discussions is running out.”
Earlier yesterday the Opposition walked out of an
Oireachtas subcommittee hearing on revised estimates for the Department of
Public Expenditure and Reform.
Fianna Fáil spokesman on Public Expenditure and Reform Sean Fleming said the
estimates contained provision for savings set out in the Croke Park II deal
which had been rejected by unions. He said the estimates were therefore flawed
and should be withdrawn.
Mr Howlin said agencies that operated under his department needed to be funded.
He said the Civil Service shared service operation needed to secure funding this
week. He suggested if there were any changes in relation to provisions for wages
in the future he would come back to the committee again and have these dealt
The Cabinet decision to reaffirm the Government’s commitment to generate €300
million in savings on the public service pay bill this year and €1 billion by
2015 followed proposals put forward by the president of Siptu Jack O’Connor for
an alternative formula for realising the savings.
He suggested use of some of the proceeds from the recent promissory note deal,
the introduction of an off-balance sheet stimulus programme and increased
taxation of the wealthy could lessen the need for cuts.
The Irish Times also reports that
economic activity in the eurozone contracted again last month, prompting
speculation that an interest rate cut may be on the cards at next week’s
European Central Bank governing council meeting.
The prospect of an imminent interest rate cut, and hints that the euro zone’s
policy of austerity could be softened, buoyed markets, with the European
benchmark index closing the highest in eight months, and the bonds of so-called
periphery countries, including Ireland, strengthening. Ireland’s 10-year bond
yield dropped to 3.48 per cent – the lowest since 2006. Two-year yields fell by
15 basis points to 0.844 per cent.
The yield on Italian 10-year government
bonds fell below 4 per cent for the first time in almost two and a half years,
while yields on Spanish and Portuguese debt dropped to their lowest level since
The Purchasing Managers’ Index for the euro zone – a key economic indicator for
the region – showed that private sector activity in all euro zone states
continued to contract last month, with Germany experiencing its first drop since
The figures came a day after European Commission president José Manuel Barroso
suggested that the economic policy of austerity could have reached its limits.
At a conference in Brussels, the European Commission chief said that while the
policy is “fundamentally right”, it had to have political and social support.
“I think it has reached its limits in many aspects, because a policy to be
successful not only has to be properly designed. It has to have the minimum of
political and social support.” Such measures had to be politically and socially
acceptable, he said.
But German officials yesterday distanced themselves from the comments, with
German foreign minister Guido Westerwelle saying that renouncing the budget
consolidation policy would increase debt and cement unemployment for many years
to come. His comments suggest the difficulties that face Germany in sanctioning
any easing of the deficit-reduction policies, particularly in an election year.
Any change in economic policy could have an impact on the deficit-reduction
targets set by the European Commission for individual member states, as well as
those in a bailout programme such as Ireland.
Yesterday’s closely watched PMI figures showed that the index for Germany fell
sharply to 48.8 last month, a six-month low. Any reading under 50 indicates
economic contraction. The index for the euro zone as a whole remained unchanged
at 46.5 in April, indicating continuing economic contraction.
There was some good news from France, where the economic output contracted at a
slower pace than the previous months, with the index increasing to 44.2 in April
up from 41.9 in March.
The disappointing economic output figures for the
euro zone emerged as separate data showed weak business activity in China and
the US. The flash PMI for the US fell to 52 last month, down from 54.6 in March.
The HSBC Purchasers Managing Index for China suggested that manufacturing growth
in China slowed last month, in part due to lower demand for exports as the
global economy struggles to recover.
The European Central Bank’s governing council meets next Thursday in Bratislava,
amid expectations that a 25 basis point reduction could be sanctioned.
Last month ECB president Mario Draghi said the bank stood “ready to act” if
needed, both in terms of “standard” and “non-standard” measures. Though interest
rates are at a record low of 0.75 per cent, this is still higher than in other
economic blocs. Economists are divided on whether an interest rate cut is
imminent. The euro fell to a two-week low against the dollar yesterday.
The Irish Examiner reports that multinationals
availing of permissive tax regimes could have their tax assessments ignored and
be forced to pay the full amount, under plans released by the European
Commission.Ireland will be asked to
nominate representatives to sit on a board to identify ways companies are
avoiding or minimising their tax, including through regimes such as that in
Ireland and the Netherlands.
This is the latest development in the EU’s growing battle to ensure countries
benefit from an estimated €1tn of tax being lost through avoidance and evasion
While Ireland is not considered a tax haven, the country has been under severe
pressure to increase its corporate tax rate and the tax structure that allows
what is known as the “double Irish”.
The body, to be known as the Platform for Tax Good Governance, will monitor
countries’ progress in tackling aggressive tax planning and clamping down on tax
“The aim is to ensure that real and effective action is taken by member states
to address these problems, within a coordinated EU framework,” said Algirdas
Semeta, commissioner for taxation.
The platform will have about 45 members including a representative from each
national tax authority, European Parliament, and up to 15 from businesses,
academics, NGOs and other stakeholders. “This will also facilitate dialogue and
exchange of expertise, which can feed into a more coordinated and effective EU
approach against tax evasion and avoidance,” he said.
The 15 will be appointed by the Commission which launched a request for
applicants to serve a three-year mandate with the first meeting to be held in
The platform will track two specific issues — member states progress on
identifying tax havens and putting them on national blacklists; and blocking off
opportunities exploited by companies to avoid paying their fair share of tax.
“These include reinforcing the anti-abuse provisions in bilateral tax treaties
national legislation and EU corporate legislation. Any artificial arrangement
carried out for tax avoidance purposes would be ignored and companies would be
taxed instead on the basis of actual economic substance”.
The Department of Finance did not respond to a query on the Irish attitude to
the platform but said the Irish presidency was working very closely with Mr
Semeta and the Commission in tackling tax fraud and evasion.
“The issue of combating tax fraud and evasion is a priority for the Irish
presidency. We are taking this work forward on a number of fronts in this area.
We are currently preparing a Council response to the Commission Action Plan to
strengthen the fight against tax fraud and tax evasion. We are working hard at
the code of conduct sub group (chaired by Presidency) — on a proposal to combat
double non-taxation and other tax evasion. We put forward a Vat anti-fraud
package but achieving agreement on the package is proving difficult,” the
While normally the spotlight is on Ireland for transfer pricing, the Netherlands
has been used by some of the largest multinationals and in 2011 they funnelled
some €57bn through the country using letter box companies.
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