Trump sets his sights on Republic’s corporate tax rate

Business Week: The ongoing housing crisis , Brexit talks and boom-time hotel rates

US President Donald Trump set his sights on Ireland’s corporate tax rate.

US President Donald Trump set his sights on Ireland’s corporate tax rate.

 

He may not be known for his ability to get stuff over the line, but US president Donald Trump will nonetheless have raised heart rates on Merrion Street this week as he delivered his first major address on tax reform.

Minister for Finance Paschal Donohoe and Taoiseach Leo Varadkar could have been forgiven for hoping plans to bring the US corporation tax rate more in line with the likes of the Republic’s had slipped down the president’s agenda.

But Trump – despite Russia, North Korea, and Storm Harvey for starters – took to the podium in Springfield, Missouri, and said the strategy of America’s economic rivals had “worked” and vowed to “fix” the problem of multinationals taking flight.

“They made their taxes lower – and far lower, in many cases, than ours – and jobs left our country,” he said. “Large corporations changed their business models by exporting jobs to other countries and then shipping their goods back to the US, where they’d make massive profits.”

Trump even singled out the Republic as he pledged to cut the US corporate tax rate to 15 per cent. “Today, we are still taxing our businesses at 35 per cent . . . in some cases, way above 40 per cent when you include state and local taxes.”

Of course, one saving grace could be the president’s ability to get his reforms through the Senate and the House of Representatives, which haven’t been friends to him thus far. “I don’t want to be disappointed by Congress. Do you understand me?” Trump said to cheers in Missouri.

A number of Irish tax experts, however, downplayed the likely impact of the reforms, suggesting the measures currently on the table would not “materially affect” our ability to attract inbound investment. That, however, remains to be seen.

For now though, things on that front remain strong. For the sixth year in a row, Ireland has been named the best country in the world for attracting high-value foreign direct investments.

IBM’s 2017 Global Locations Trends report, said the Republic continues to lead on value, coming top of a list that also includes Denmark, Singapore, the Netherlands, Hungary, Sweden, Japan, Costa Rica, Switzerland and Hong Kong.

According to the report, FDI levels increased significantly last year with the numbers of jobs created as a result rising by 10 per cent, its strongest level in a decade.

Housing crisis

For all the money and jobs pouring into the State, this was also a week when homeless man Jack Howlett-Watson, a former chef in his 50s, was found unconscious in the early hours of the morning on Suffolk Street, Dublin, before later being pronounced dead.

That the discovery was made close to Dublin’s flagship shopping district on Grafton Street propelled the story into the newspapers, but campaigners will tell you that homeless people are dying down back alleys and in the back rooms of dingy hostels every month.

There was, however, some positive progress on dealing with the housing crisis. Ambitious plans to establish a benevolent vulture fund which would buy up €5 billion of distressed mortgages and let properties back to the occupiers took a significant step forward.

Grafton Street, near to where a homeless man was found dead.
Grafton Street, near to where a homeless man was found dead.

The aim of the scheme is to keep families in their homes, and the Right2Homes group, which is involved in the plan, said it had received assurances around a significant tranche of funding from US investors following a three-day visit to New York last week.

They met with several prospective investors and funders, including Patrick Doherty, director of corporate governance at the office of the New York state comptroller, which manages the state’s pension fund, the third-largest pension fund in the US with more than $190 billion of managed assets.

The organisation also held a meeting with Limerick-born Michael Dowling, chief executive of US hospital and insurance group Northwell, formerly North Shore-LIJ Health System, which boasts an annual turnover $8.7 billion (€7.3bn).

Elsewhere, Davy Stockbrokers informed investors that housebuilder Cairn Homes is likely to complete building on 97 homes in the first half of this year and a further 300 in the second half as the company looks to “take advantage of the sustained recovery” in the housing market.

Separately, three directors behind another housebuilding company are set to benefit from a multimillion-euro share incentive scheme.

A new company called Glenveagh Properties is being lined up for a €350 million initial public offering by US private equity group Oaktree, which has been one of the most active buyers of distressed property loans and assets in the Republic in recent years.

Oaktree has been working for some time with Maynooth-based builder Bridgedale, led by Stephen Garvey, on a plan to combine assets in a vehicle and float it on the stock market to take advantage of a shortage of homes in the Republic.

Meanwhile, the latest figures from the Banking & Payments Federation Ireland showed the number of mortgages approved rose by 17 per cent year-on-year during July, with just over half these accounted for by first-time buyers.

Brexit blocks

UK Brexit secretary David Davis and EU chief negotiator Michel Barnier could not even agree on how things were going at a press conference this week, which was described by one reporter as “easily the most awkward and inauspicious” so far.

Davis presented a stiff upper lip on the third round of talks, but a flabbergasted Barnier said there had been “no decisive progress”; the UK had not fully accepted the implications of leaving the single market; and its demands were “simply impossible”.

UK Brexit Secretary David Davis and EU chief negotiator Michel Barnier could not even agree on how things were going at a press conference this week.
UK Brexit Secretary David Davis and EU chief negotiator Michel Barnier could not even agree on how things were going at a press conference this week.

None of that will have helped sterling, which hovered close to 92p against the euro on Wednesday, just above an eight-year low, and more than 20 per cent below its pre-Brexit value.

The latest swing against the currency prompted predictions it may be headed for parity with the euro, a scenario that could drive many Irish exporters out of business, not to mention retailers and tourism companies that rely on UK business.

The plan of action in Dublin appears to be diversify, diversify, diversify. Exporters are desperately clambering to reduce their exposure to the UK market, with the Far East an oft mentioned potential refuge.

Chinese inspectors made another trip to the Republic this week, visiting eight beef plants, as the torturous process of securing Beijing approval for export licences continues.

Meanwhile, businesses said “huge opportunities” exist in Hong Kong as Dublin Airport announced direct flights from the Republic to the autonomous territory on China’s south coast from next year.

The new year-round service, run by Cathay Pacific, will operate four times per week from next June, and will be Dublin Airport’s first ever direct route to the Asia-Pacific region.

Hotel prices

Finally, the Basil Fawltys of Dublin are raking it in, according to a survey which showed hotel room rates have reached an all-time high, eclipsing the prices of the last boom.

Prices in the capital surged at nearly twice the rate of the rest of the State over the past year, the annual Crowe Horwath hotel industry survey showed. The average rate in Dublin is now €128, up from almost €112 last year.

That might have something to do with why listed hotels group Dalata has stepped up its efforts to take control of the 352-room Clarion Liffey Valley – one of the largest hotels in Dublin.

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