Cantillon

Thu, Dec 6, 2012, 00:00

Inside the world of business

Tread warily in the area of property tax

Opponents of a full-blown property tax may have enjoyed a half-hearted cheer yesterday when they heard the UK’s chancellor of the exchequer George Osborne declare the door closed on such an instrument in his jurisdiction.

In delivering his Autumn Statement before the House of Commons yesterday, Mr Osborne (who already presides over a council tax) said a new property tax would be “intrusive” and would raise little, despite being expensive to levy, as it would require the revaluation of thousands of homes.

He also observed that future chancellors would find it impossible to resist “the temptation” to bring more homes into its net in the future. “So we’re not having a new homes tax,” he declared.

By contrast, closer to home, the Minister for Finance, Michael Noonan, was yesterday talking up the benefits of his new property tax, saying such measures were recognised as being “better for the protection and creation of jobs than taxes that increase the cost of employment”.

So who is correct? As usual in such matters, the real picture is a highly-nuanced one which owes much to differing tax bases and varying tax structures.

The tax rejected by Mr Osborne would have in effect been targeted at the well-off, or those with bigger, more valuable properties and (so the simple argument goes) greater means to pay. To work, it would have needed a wholesale reform of the English and Scottish council tax systems, which are based on bands referring to the value of a given property not this year, not last year, but in 1991. In Wales, the reference year is 2003, while the North’s rates system harks to a highly-modern 2005.

Mr Osborne was presumably reluctant to target his middle-class voter homeland, where voters would probably have ended up paying more than they do under the existing system. Mr Noonan, alas, does not have the luxury of such politics, managing as he does the finances of a bankrupt country in hock, although his version of a mansion tax did make a small statement.

His counterpart’s warning about the expense and intrusive aspect of implementing a valuation system may cause some shivers though, as he faces into six months of making a property tax list, checking it twice and . . . well, you know the rest.

Esat debacle: this time it's Persona

The disaster that was the 1995 mobile phone licence competition has become a many-headed hydra that is proving difficult to kill.

The Moriarty tribunal issued its report on the matter in March of last year, and found that the then minister Michael Lowry interfered in the process to the benefit of Denis O’Brien’s Esat Digifone.

The Taoiseach, Enda Kenny, has said he accepts the tribunal’s findings, yet his Government has decided to contest a case being taken against the State by the remaining owners of the Persona

consortium. This is despite the fact that, on the basis of the tribunal’s report, Persona could well have won the competition for the licence had it not been for Lowry’s interference.

Yesterday Transparency International said Ireland had slipped 11 places, to 25th, in its Corruption Index, with the local branch of the organisation citing lack of action on the findings of the Moriarty and Mahon tribunals as part of the reason for the sharp fall.

The State has now served notice that it believes that if Persona wins its case, then the consortium’s targets should be Lowry and O’Brien.

Lowry and O’Brien (above) have rejected the tribunal’s findings and say they welcome the fact that the High Court will now adjudicate on the claims being made about the competition.

The State’s position appears illogical, defending a case that is, in the main, based on the tribunal and its findings, which it has accepted. On the other hand, seen through a prism where principle is a foreign concept, it makes some sense: heads Persona loses; tails O’Brien and Lowry lose.

In another universe, the Government could have reacted to the tribunal’s findings by immediately initiating cases against Lowry and O’Brien.

But that does not seem to be the way things operate in this State.

Observers will have noticed €855 million raised for the exchequer by Comreg recently by way of the auction of four new phone licences.

The cost of the licence won by Esat, the second in a two-licence market, was capped at just £15 million.

Hope for Nokia with China in its hands

It seems there might be life left in Nokia yet. The firm has been regarded as an also-ran to the stellar performance of Apple and Samsung in recent years but yesterday there were signs that it is ready to fight its ground.

The Finnish firm confirmed it has completed a deal whereby a version of its flagship Lumia 920 smartphone will go on sale to China Mobile’s subscriber base of more than 700 million customers.

It offers an enormous opportunity for Nokia, maybe one of the best opportunities for its smartphones at the moment.

This market has a lot of piled-up demand for high-end devices. What’s more, it means Nokia has a lead on Apple, which has yet to forge a deal with China Mobile, the largest player in the world’s largest mobile phone market.

While such a deal is likely in the near future, the fact Nokia phones will get first advantage with this large customer base shows some spark of initiative from the Finnish firm. It could do with some more.

While shares were up 8.7 per cent yesterday on news of the deal, that was still 28 per cent down on the year.

Sales of Nokia’s new Lumia 920 and 820 models – which operate on Microsoft’s Windows Phone 8 software – are seen as crucial for the Finnish company as it tries to regain global market share from Samsung and Apple.

Nokia’s share of the global smartphone market has plunged to less than 10 per cent, from 50 per cent during its heyday before the iPhone arrived in 2007.

Today, Nokia relies on Windows after dumping its own software platforms last year. Initial reaction to the new Lumia devices has been positive, but securing a strong share of the Chinese market will be critical to Nokia’s success.

Today

While much of the morning will be dominated by post-Budget analysis, the ECB today decides on interest rate changes, while the EU’s tax commissioner, Algirdas Semeta, is due to publish proposals to deal with unfair tax competition.

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