Cantillon

Sat, Nov 3, 2012, 00:00

Inside the world of business

Another Spanish student of our banking crisis arrives

VISITS BY Spanish officials and bankers continued earlier this week with the arrival in Dublin of Antonio Carrascosa, the latest high-ranking official from Madrid trying to learn more about how Ireland dealt with toxic bank assets.

Carrascosa is director general of Frob, Spain’s bank rescue fund and their answer to our National Pensions Reserve Fund which was raided to recapitalise Irish banks.

Among those he met were John Moran, secretary general of the Department of Finance, and Ann Nolan, head of the department’s banking unit, as well as members of her team.

The Spaniard was interested in the actions that the Government had taken to deal with the banking crisis.

Undoubtedly high on their agenda were the setting up of the National Asset Management Agency and the pricing by the Government of the €74 billion of loans transferred from the five banks to the State agency.

It was announced earlier this week that Spain’s bad bank, known as Sareb, will buy property assets from the country’s banks at an average discount of 63 per cent. This compares with the average discount of 57 per cent Nama paid.

Frob is overseeing the setting up of Sareb, which is being established as a condition of the €100 billion funding to the country’s banks from the EU bailout funds.

Carrascosa follows senior executives from Spain’s second-largest bank, BBVA, and the head of the country’s worst lender, Bankia, in picking brains in Ireland about how Dublin dealt with toxic assets.

Frob was keen to stress in recent days that the value assigned to assets being transferred to Sareb should not be a “reference” to property held on the books of the rest of the banking industry.

Unfortunately that wasn’t the case in Ireland, as the value assigned by Nama to the loans ultimately ended up being at or close to the market value of the loans, given the additional discounts.

Spain may be more interested in what Ireland did wrong than right.

Ireland should wake up and smell the coffee on tax debate

IT DID not take long for the fuss over Starbucks Coffee Company’s UK tax avoidance scheme to cross the Irish Sea. People before Profit took the streets of Dublin yesterday, picketing the Starbucks outlet on Dame Street. (See page 5 for full report).

They raged against the the fact that Starbucks paid less than €40,000 in tax here between 2005 and 2011 while paying €5.7 million in royalty and licensing fees to its parent company in the same period. It is the same mechanism used by the company in the UK, with the royalty and licensing income routed through a Dutch subsidiary in a “tax-efficient” fashion.

In many ways the only real surprise is that Ireland does not feature prominently in the Starbucks rinky-dink. The Dutch-based tax structure used by Starbucks is a second cousin – if not an even closer relation – of the various Irish-based tax structures used by so many multinationals, including the infamous Dutch sandwich employed by Google which seems to have so enraged the French.

Two points are relevant in this context. The first is that Ireland should clearly invest some energy in ensuring that the debate about tax competition in Europe is spread out to include the Dutch, who also play the game pretty well. Starbucks is clearly not the only multinational to be alive to the tax advantages of being domiciled in Holland.

The other point is somewhat more biblical. And it is that it is difficult to give out about what Starbucks is up in Ireland tax-wise without also applying a similar level of scrutiny to the various multinationals based in Ireland – such as Google – which do the same but in reverse.

Happily, the close proximity of Starbucks outlets to the office of such companies will allow for very efficient protesting. And not doing so would leave People before Profit open to charges of hypocrisy, although this has not proved too much of a burden in the past.

Did Quinn decide nine weeks in jail was a price worth paying?

THE QUINN family asset-stripping saga has been full of unexpected twists and turns and yesterday’s chapter continued in that mode.

When Ms Justice Elizabeth Dunne was reading out her judgment, Seán Quinn snr sat stony-faced at the back of the court awaiting his fate. The only time he appeared tearful was when the judge referred to his humble beginnings and his subsequent rise to wealth and success.

After the sentence had been announced discussion began between counsel and the judge as to whether she would grant a stay on the sentence pending an appeal to the Supreme Court.

Quinn’s legal team seemed very ardent but then Seán Quinn jnr walked up from the back of the court and had a word with his father’s counsel, Eugene Grant QC. An adjournment was then sought on the basis that Mr Quinn might want the court to send him straight to jail. The judge appeared surprised, as did Mr Quinn’s legal counsel.

Following an adjournment – during which Mr Quinn, his son and others repaired to the Four Courts bar and ordered pints of lager – the judge was told the former billionaire indeed wanted to go straight to jail.

The decision to request an immediate sentence chimes with a view held by some in the Irish Bank Resolution Corporation that Mr Quinn was not averse to going to jail, as he had the view that it would reflect badly on the bank.

Indeed, going on the basis of the finding made by the judge, Quinn may have long believed jail was a likelihood. Only the Quinns know the answer.

One complexion than can be put on this latest turn of events is that the family weighed up the situation and decided the nine-week jail term served by Seán Quinn snr was a price worth paying to draw a line of sorts under the current legal proceedings.

When you consider that millions in Quinn Group assets remain unaccounted for, such tactics represent a great challenge to the rule of law.

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