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News : Irish Last Updated: May 22, 2013 - 3:11 PM

Wednesday Newspaper Review - Irish Business News and International Stories - - May 22, 2013
By Finfacts Team
May 22, 2013 - 7:21 AM

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Irish Independent

Public Expenditure Minister Brendan Howlin says he is confident the Government will secure the necessary €300m of public sector savings this year after Labour Relations Commission chief executive Kieran Mulvey won agreement on a new deal.

Workers who fail to sign up to the new deal will not get to claw back their pay cuts in future years.

And they will also lose the protection against compulsory redundancies contained in the existing agreement.

The Government hopes the revised agreement will be accepted after striking different deals with individual unions. They have received guarantees that elements of pay now being cut will be returned in future years, and specific arrangements on the freezing of increments.

But any union outside the deal will not receive these benefits. The legislation being drawn up by the Government will freeze increments for three years.

However, unions that struck their own deals won concessions of pauses on the payment, dependent on the income band, which soften the blow.

THE Government has effectively stumbled into what might now be called a third Croke Park deal with the public-sector unions.

While Expenditure & Reform Minister Brendan Howlin stood back, periodically waving the big stick of harsher pay cuts imposed by legislation, it was the experienced chief executive of the Labour Relations Commission, Kieran Mulvey, who pursued the tactic of negotiating with each union separately in each sector, rather than a 'one size fits all' approach with the public-sector unions as a whole, which proved to be the downfall of Croke Park II.

Though Mr Mulvey was involved in the original Croke Park II talks, he was more a facilitator then.

This time, he was rolling up his sleeves and doing what Mr Howlin should have allowed him to do almost six months ago.

APPLE is the sexiest company on planet Earth. Its tax affairs are in the spotlight both because of Apple's sheer size, and also because political posturing against semiconductor companies would fall flat in the media.

We are tax compliant, according to the OECD, but yet a subsidiary of Apple can exist and not exist at the same time?

This isn't quantum mechanics, there's no Schrodinger's cat, both alive and dead in the box at the same time. The company has to pay its tax somewhere, to some nation.

Second, we have to recognise this story is not just about Apple. All multinationals try to stop paying their taxes in some form in order to realise the largest gain for their shareholders.

Last week British MPs excoriated Google's use of what they called 'smoke and mirrors' using their Irish subsidiary to avoid paying tax in the UK, and there have been many instances of companies like Starbucks and others using national and international tax structures in ways that are not ethical.

Third, we must recognise that these actions to maximise shareholder value have real world consequences.

SOFT drinks maker Britvic will merge its Irish and British operations and close a warehouse in the North and as part of a new strategy announced with its interim results.

The proposals aim to deliver annual savings of £30m (€35m) as it creates a combined British and Irish business unit under a single leadership team. The group will also close two factories in England.

The company has also reached an agreement with Narang Group for the national sales and distribution of Fruit Shoot in India, commencing mid-2014.

Irish Times

Measures to spread the financial burden of failed pension schemes more evenly on members will not be included in legislation being published today.

The Social Welfare and Pensions Bill had been expected to announce changes to the priority order, which currently means that people who have already retired have prior call on the assets of an insolvent pension fund ahead of colleagues who are still working.

However, it is now understood the Minister for Social Protection Joan Burton will postpone changes to pension schemes while the Government digests the full implication of a recent adverse ruling in the European Court of Justice which could see it landed with a bill for €300 million.

Ireland’s reputation took a battering at a high-profile US Senate hearing yesterday where the country was labelled a “tax haven” in an investigation into the offshore tax practices of technology company Apple.

The California-based firm was accused of avoiding tens of billions of dollars in US taxes by sheltering profits in Irish “ghost companies”, which did not have to pay taxes anywhere, under a special deal with the Irish authorities.

But, in the Dáil yesterday, Taoiseach Enda Kenny rejected claims that authorities had negotiated special deals with any business. He also dismissed the notion that Ireland was a tax haven.

“Ireland does not – I will repeat – does not do special tax-rate deals with companies. We don’t have any special extra-low corporate tax rate for multinational companies,” Mr Kenny said.

Speaking in Brussels, Tánaiste Eamon Gilmore said Ireland does not have any special low corporation tax rate for multinational companies and that the tax system was “based on Irish law”.

Tax avoidance is back on the political agenda with a vengeance, creating the sort of uncertainty and headlines that make large corporations with complex tax structures nervous.

In Britain last week, Margaret Hodge, chairwoman of the public accounts committee there, told Google’s northern Europe boss, Matt Britton, his company’s behaviour on tax was “devious, calculated and, in my view, unethical”.

This week, Apple made a lengthy statement to the US senate, explaining its global tax strategy. The core of the statement was that tax is a cost and that Apple needs to minimise costs to remain competitive. It also made the point it does not use tax havens to reduce taxes on US sales, but made no such argument in respect of non-US sales, which is where the use of its Irish companies comes into play.

For companies such as Google and Apple, the attraction of Ireland is less about our low corporate tax rate and more about the fact that companies can structure arrangements to pay significant royalty fees on valuable intellectual property. These fees are paid to a low-tax jurisdiction (or tax haven if you prefer) effectively reducing taxable profit in Ireland to negligible levels relative to the declared revenues. As the valuable intellectual property is not owned by an Irish tax-resident company, it follows that the significant profits should not be earned in Ireland. Provided the royalty payments to the tax haven jurisdictions are at arm’s length, the structure is tax-compliant.

If the basic game plan is for Dublin to continue doing quietly what it has always done in the business tax sphere, trouble is mounting rapidly. The Apple revelations suggest a system the Government does its utmost to protect provides crucial legal cover for international businesses to minimise their tax exposure to the point that they pay only negligible amounts.

Even if everything is carried on within the exacting letter of the law, it does not look good when a company’s operations here make vast profit and it pays next to nothing in tax. To say as much is not to diminish the importance of the multinational sector when it comes to the creation and protection of employment.

Perception is crucial in the international arena, particularly as the Coalition seeks to rebuild the State’s reputation in the wake of the EU-IMF bailout. It cannot be in the Government’s interest to have Ireland portrayed as a soft touch, open to exploitation by companies seeking to shelter their income from the tax authorities in places such as Washington. This is all the more so as governments around the world seek to rebuild their battered finances in the wake of the financial crisis.

Irish Examiner

The Government will be forced to scrap the tax arrangement known as the “double Irish” in order to avoid criticism of the country’s tax system, says one of the most senior tax experts in the country.

The tax consultant, who did not want to be named, claimed that the “double Irish” and another controversial tax mechanism known as the “Dutch-Irish sandwich” would be gone within 18 months.

This complex mechanism enables an Irish onshore company to make royalty payments to an offshore Irish company, which in the case of Apple is based in Bermuda. It has been the subject of much criticism.

A spokesman for the Department of Finance said, “International tax planning takes advantage of these differences in national systems and rules. The best way to combat such arrangements is for countries to work together — at EU and OECD level — to examine these structures and consider how international rules can be implemented to ensure fair levels of taxation. Ireland is fully supportive of international efforts in this regard and is an active participant in the OECD project on base erosion and profit shifting which seeks to deal with these issues.”

Ireland’s tax regime is currently the subject of intense scrutiny because of US Senate hearings into Apple’s tax affairs.

Siobhan Talbot is set to succeed John Moloney as group managing director of Glanbia, at the end of this year — becoming the first woman to head up a major Irish food company.

Currently Glanbia’s group finance director — a role she has filled for the past four years — Ms Talbot will formally become group managing director-designate at the beginning of next month, with the appointment of a new group finance director expected “in due course”.

The move follows Mr Moloney — who has led the Kilkenny-based ingredients and dairy giant for the past 12 years and has been with the company for a quarter of a century — notifying the board of his intention to retire at the end of 2013, a year earlier than his initial due date.

Euro Topics reports: The Islamic-conservative AKP party, which rules with an absolute majority in Turkey, is preparing a law that would completely ban advertising for alcoholic beverages and considerably restrict the sale of such products. On Monday a list of states was published that have similarly rigorous bans, including Bangladesh, Egypt, Yemen and Saudi Arabia. For the conservative daily Hürriyet such bans have no place in a democracy: "Democratic states don't impose bans but instead try to influence consumer behaviour. In order to reduce excessive consumption, they try to protect children and youths as target groups and warn them of the harmful effects of alcohol. If we look at just this political field we can say that the alleged 'progressive democratic understanding of the AKP' is more a kind of Islamic fascism."

Spain came in second to last place at the Eurovision Song Contest in Malmö on Saturday. Since the voting for the most part has nothing to do with the quality of the performances, it would be better just to give the event a miss in future, the conservative daily ABC writes: "Although they did their job well, our representatives at this yearly European musical romp - the group El Sueño de Morfeo - once again failed in grand style. This edition of the gala - flamboyantly staged, as it is every year - saw us take a surprising second to last place. And like so often in the past, it was clear that those countries that see eye to eye in politics and culture unabashedly gave each other their votes. For that reason many sceptics say that in times of crisis we should just spare ourselves the trouble of participating in this camp and commercial music festival. That would not only cut costs, but also spare us the shame of such a pitiful result."

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