EU Corporate Tax Rates – A case of Schadenfreude

 I repeat my blog of last March given the latest mutterings in advance of this week’s Summit.

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Our EU friends – President Sarkozy and Chancellor Merkel – have put Ireland under terrible pressure in relation to our domestic corporate tax rate and indeed have not been too generous in acknowledging that Ireland’s banking crisis has significant implications for their own banks. We have been accused of ‘fiscal dumping’ by M. Sarkozy and according to the French President Ireland has ‘unfair advantages’.

One could be forgiven for thinking that Ireland was a competitive threat to these economies.

What the French and the Germans have failed to mention are the enormous subsidies which they provide to their private sector.

Consider the following facts (all based on statistics provided by the European Commission):

1. France provided €135 billion in State subsidies in the past five years (2005-2009); Germany spent €237 billion, well in excess of Ireland’s GDP, over the same period. Excluding crisis measure, and on average, Ireland spent a more modest €738m per annum.
2. France provided over €1.14 billion to 25 large scale projects over just three years (2007-2009) with a staggering €340m in grants paid to one company; an average of €46m per company. Ireland provided no grants to companies in this category.
3. Both France and Germany have stepped up the amount of State subsidies over the past years.  Ireland‘s trend is for an absolute reduction in the level of State aid. In fact, the level of French subsidies increased by nearly 50% over the three year period 2007-2009.
4. France (2009) provides 18 times more State aid to French manufacturing companies than Ireland; the multiple for Germany is 21 times.
5. In the strategically critical area of R&D, French and German State subsidies (at around €4.4 billion in 2009) were 14 times higher than the level of support provided by Ireland.
6. Regional development State subsidies in France and Germany are very popular as they are used to attract companies. In the past five years these grants were worth nearly €30 billion (somewhat less than what Ireland will collect in tax this year); or 20 times more than the equivalent amount which Ireland spends on regional development.
7. Consistently, France and Germany are the by far the highest contributors of absolute amounts of State subsidies to industry and services.
8. French FDI activity was up 22% 2010 on 2009 in the midst of the EU’s worst economic recession, with over 1,500 investment projects approved in the past two years.

These bald facts tell us that the debate on corporate tax should be extended to cover the incredible levels of State subsidies which France and Germany continue to spend in providing grants to their enterprise sector.

A case of the pot calling the kettle black!

Sure ‘tis no wonder that the German economy is booming and that France secures over 20% of all EU FDI.

 

Shared Services – Outsourcing

 As part of the budgetary process the Department of Public Expenditure and Reform published a series of reports about the findings of the comprehensive expenditure review at departmental/agency level.

 These can be accessed on the enclosed link: http://per.gov.ie/comprehensive-review-of-expenditure-submissions/

 The D/PER report, for example, covers the activities of CMOD (page 59), e-Government policy and solutions, the Government Networks (VPN) (page 63), technology policy and the potential for savings (page 67).

The reports from other Departments and Agencies cover outsourcing and shared services opportunities.

 These insights will help suppliers identify potential opportunities that may go to tender next year.

Carbon Tax

The carbon tax as currently applied has, as I have said for several years, nothing to do with a serious attempt to reduce greenhouse gas emissions.

For a government that supports evidenced-based research it needs to be pointed out that the carbon tax will not have a meaningful impact in terms of reducing emissions as only a tax at around €180/tonne (six times the new amount) will result in a noticeable fall in emissions.

It is a crude stealth tax as none of the revenue is recycled to benefit mitigation or adaptation measures.

The budget increase does not apply to the highest emitting fuels: peat and coal. Strange.

Minister Hogan, who delivers a carbon budget later in the week, should acknowledge the ‘carbon’ tax is basically an excise tax.

Budget 2012 and Privatisation

May be I messed something but it appears nothing was said about the sale of State assets.

The budget tables do not include any provision for revenue receivable from these transactions.

Is privatisation off the agenda?

Printing Deutschmarks

I was told by a source in the printing industry some weeks ago that the Germans were printing DMs.

Surely not said I.

Google ‘printing Deutschmarks’ and you will be surprised by what you will find!

God help us if the Germans abandon the Euro.

Public Sector Reform Plan – Croke Park 2

Yesterday, I chaired a conference on the Public Sector Reform Plan organised by iQuest.

My opening remarks are enclosed.

The positives are the clear intent of Government and the fact that the public sector trade unions have bought in to what amounts to Croke Park 2.

However, to date there is limited evidence of leadership among many of senior public servants for a fundamental reform and modernisation programme.

If it is to succeed the Reform Plan will require a shift in behavior, a less risk-adverse culture and a relentless push to extent the e-government programme across government.

 

 

Phil Hogan’s Big Idea

Critics of the Minister’s apparent U turn on Ireland’s climate change policy would be well advised to read his Department’s well-written Review of National Climate Policy. The Government has got the message: the debate has moved on from one of strict compliance with a view to reducing greenhouse gas emissions and to increase the share of renewable energy to a much more strategic discourse about how Ireland must prepare to become a low carbon economy.

Yes, legislation will be needed, but as correctly stated by the Minister its content must be informed by evidenced-based policy research. Hence the NESC has been tasked with this job. The big unknowns are: how the effort to meet the current (minus 20% by 2020) emissions reduction target will fall in an equitable manner on households, farmers and businesses; the impacts of the higher targets that will be introduced once international negotiations on climate change are concluded next year; and how to deliver the EU’s and Ireland’s political commitment to reduce greenhouse gas emissions by 80% by 2050.

Ireland needs a Low Carbon Plan for quite a few reasons.

Firstly, Ireland has world class resources in abundance (wind and water being two obvious examples) but has yet to determine how best to develop these assets in a sustainable manner and the potential scale of the investment. Secondly, the projected €80 billion in green economy investments (renewable, grid, forestry, water and waste etc.) in Ireland already announced could generate upwards of 80,000 jobs. To put it more bluntly, a fifth of the people who are currently unemployed could find jobs in green economy companies if the government and its agencies got their collective act together. Thirdly, current enterprise policy has not given the green economy sector the same priority (nor resources as a consequence) as ICT and pharmaceuticals. Thus the State’s agencies responsible for this sector are not helping more Irish indigenous companies target the UK’s £325 billion investment in their green economy. Finally, project promoters (of which there are very many) need policy certainty, all bottlenecks to deployment removed and a whole of government approach to the twin challenges of climate change and energy security.

While we await the NESC review, the Minister might wish to consider the following options that are cost neutral but which if acted upon promptly could give a significant and short term boost to Ireland’s fledgling green economy sector.

Firstly, concentrate all the State’s efforts (including R&D) into one agency. SEAI is the obvious candidate given its credentials and reputation as a ‘can do’ organisation. The underused engineers and planners in the NRA, RPA and local authorities should be transferred to this agency and tasked with facilitating the construction of the necessary infrastructure and the development of the emerging technologies, including ICT convergence. Secondly, a share (say 50%) of the Exchequer’s revenue from carbon taxation and the auctioning of emissions permits should be recycled into potentially commercial and sustainable projects:  at least €1 billion in additional ‘green’ revenue will be collected by 2020. Thirdly, the enterprise agencies should be instructed not to grant aid companies (other than by way of competitive tendering) but to finance all the sub-sector networks that advise and support these innovating cleantech/greentech companies. Specialist staff in the agencies would be better employed working in these networks than processing application forms. Fourthly, stop the prevarication and require the electricity generators to co-finance a nation-wide

programme of retrofitting for energy efficiency in some one million households. Finally, Ireland should introduce schemes (all approved under EU State aid rules) to support R&D, the wider use of environmental technologies, and ICT convergence that many of our competitors already take advantage of.

The green economy is happening. It is real. Jobs are being created. For example, according to Bloomberg New Energy Finance, some $41 billion was spent on clean energy  investments in the third quarter this year across the globe despite of (our because of one might argue) the economic down turn. In addition, $2.2 billion was invested in just three months in renewables projects by venture capitalists. The European Commission, the OCED and many developed countries (including the UK, the Scandinavian countries and China) have adopted low carbon strategies that are already resulting in a surge of investment. Ireland (again) is playing catch-up with its competitors. The fact that Ireland does not feature as investors look elsewhere for ‘green’ investments should be a matter of concern for everyone.

This country has more strategies than counties. Some have been on the shelf for years. Very few are being fully implemented. Most have no budget or a detailed implementation plan. Whatever Minister Hogan does he should not let the much needed 2050 Low Carbon Plan fall into the same trap. We need to identify and plot a sustainable and affordable pathway to transition Ireland as a low carbon country; to be a world leader where we have a natural competitive advantage. This ambition will not happen unless the Minister and his advisors engage with the private and public investors who have projects in the pipeline but are frustrated at the government’s inability to get their plans to a ‘shovel ready’ state.

Ireland – A Low Carbon Economy?

While we are tranfixed by Troika issues to the exclusion of nearly everything else, there is a raging debate going on in other countries as to how they can gain a competitive advantage by securing first mover advantage as a low carbon economy.

My thoughts on the issues that we need to consider are enclosed.

All comments welcome.

West Cork

O’Sullivans on the pier in Crookhaven on a sunny day with a pint at the ready and a crab sandwich at hand represents the best of holidaying in West Cork, or indeed in Ireland. Once the Suduko and Simplex were sorted we walked to Barley Cove (some 6kms) but did not make it to MIzen Head. The blue flag beach was packed with eager kids with buckets and spades. In common with most places we visited there were very many English families about.

The Grove House in Schull (02828067) is a treasure; a great B&B (a Bridgestone recommendation) with Katrina a charming host and her son Nico the chef serving the best of local fare for dinner; smokies and lemon sole and a Spanish Crianza helping out. The house was built as a hotel in 1880 and has many of the original features. We stayed in the Ross room at the front of the house which has an uninterrupted view of the harbour. There was a world team sailing event in the village so there was a great buzz about.  To be honest I was not impressed with Schull. Far too many holiday homes, below standard pubs and a limited selection of restaurants (two of which closed at 4 on the Sunday we were there).

It is a short drive to Baltimore where we stayed in Caseys, an Irish Country House Hotel. The town was quiet after the excitement of the Fasnet race Rambler 100 salvage. The hotel is a short walk from the centre of the town which boasts many bars and restaurants. We opted to eat in the hotel and splurged on their recommended seafood platter; washed down with a Bourgogne Pinot Noir.

The following day we mozied along through Union Hall and the lovely Glandore (where The Glandore Inn serves fresh prawn open sandwiches) and onto the Inchydoney Hotel aside the much acclaimed beach. Following the customary beach walk it was off to the pool for a swim, steam and sauna. The hotel’s Gulfstream restaurant was not busy but service was attentive. It has a nice feature in that you are served canapés in the adjacent residents’ lounge. Foie Gras and Duck (healthy options!) and a Chablis were consumed at leisure over dinner.

Clonakilty (The Winery), Courtmacsherry (The Lifeboat Inn) and Ring (Deasys) all provided places of refuge during our short staycation in West Cork.

 

Castlemartyr

It may be NAMAised but the Castlemartyr 5*Resort in East Cork shows no sign of the recession or any drop in its high hospitality standards. It was almost full last weekend with a wedding party in full swing on both days enjoying its splendid facilities. Now twinned with Dromoland the local rumour is that it will out of NAMA sooner rather than later.

The golf course is top class; an assessment a bit biased as I had three birdies during a two hour 30 minute early morning round. It suits my game – there are no trees and wide fairways on this inland links type course designed by Ron Kirby.  At €40 the green fee is great value. I would strongly recommend the course: phone 0214219001 for details.

The Bell Tower restaurant is small but serves a tasty array of food. I had smoked haddock risotto, sea bass with local cheeses all washed down with a bottle of Albarino. The breakfast was also great. Try the eggs Benedict with local cooked ham. Yum. The Knight’s bar is the location of the former oratory.

As Ballymaloe House was close by we headed over for dinner and were not disappointed: it does what it says on the tin (figuratively speaking). Fish soup, smoked mackerel, monk fish and scallops, local cheeses (again) and the ubiquitous desert trolley did the business with a Loire La Tourraine assisting. An impromptu sign song developed after dinner and I have never experienced such an array of amazing talent. Ballymaloe’s proud reputation was enjoyed by a full house and many visitors we spoke to were fierce impressed. Billy a local taxi driver who has a swish Chrysler gave us all the local gossip (087 6100128).

Lynch’s Bar in Ballycotton is a fine place (serving the best of prawns) but holds bad memories; we watched the Ireland – England match there.

The site is full of history and dates from the 12^th Century. Castlemartyr Castle was badly damaged after the Williamite wars in 1688 and ceased to be used as a residence. The Earls of Shannon started work on the mansion around 1733. One of the family, Henry, was Speaker of the House of Commons and was elevated to the peerage in 1756 as Baron Castlemartyr. The village saw more than its fair share of action during the Troubles. The mansion was taken over by the Carmelite Order and was a boarding college for boys from 1930 to 1996. The Cappela Group then developed this 18^th century classic manor house with the addition of a modern wing (109 rooms) and a vast award-winning spa.

Castlemartyr has won many awards – Trip Advisor Hotel of Excellence 2011, Conde Nast Traveller Readers Choice 2009, Georgina Cambell’s 2009 Hotel of the Year – all fully deserved. As long as the current  policy of keeping costs low continues to apply add this resort to your list of staycation musts.