Donohoe refuses to criticise Berlin at Brexit love-in
Business Week: also in the news was Intel; corporation tax; and new green policies
Minister for Finance Paschal Donohoe at Government Buildings. Photograph: Alan Betson / The Irish Times
“Hindsight is the very finest of qualities,” mused a philosophical Paschal Donohoe this week when asked about comments from a former German official suggesting Ireland was hit with unnecessarily harsh austerity measures a decade ago at Berlin’s behest.
Prof Christian Kastrop, a former aide to Wolfgang Schäuble – Germany’s federal finance minister in the aftermath of the bailout – said: “They could have been more generous towards Ireland in many cases without overdoing things.”
Donohoe, the Minister for Finance, was in the German capital to meet current federal finance minister Olaf Scholz, as well as Schäuble, now president of the Bundestag, and new ECB chief Christine Lagarde as part of a bridge-building exercise ahead of Brexit.
It’s fair to say Donohoe was generous in his reply to Kastrop’s comments. There was a “huge amount of learning to be had” on obligations facing programme countries a decade ago.
“One of the lessons I have learned is to do all you can to avoid being in a situation where you are locked out of financial markets and where your economic sovereignty is compromised. When you become that vulnerable all choices open to you are bad.”
On that note, the head of the banking lobby this week said bankers should not be put on the “bold step” for expressing views on regulatory or economic policy if Irish society is to avoid repeating the mistakes of the financial crisis.
Brian Hayes, chief executive of the Banking & Payments Federation Ireland, was referring to the drowning out of contrarian voices. “We need to be mature about this,” he said. “We live in a free society. We should not be afraid of contrarian views.”
Of course, the country could well find itself up the creek once again, with or without the same mistakes. The Irish Fiscal Advisory Council (Ifac) warned this week that up to €6 billion or 60 per cent of the Government’s corporation tax windfall may be temporary.
Business tax receipts rose to a record €10.4 billion last year, more than double the amount collected in 2014. The jump has been linked to the “on-shoring” of assets here in the wake of a global clampdown on multinational tax avoidance.
Separately, EU ministers blocked attempts by the European Commission to require multinational companies to publicly report their tax payments country by country, something which could dissuade companies from shifting profits to low-tax areas.
Corporation tax was on the table again at the American Chamber of Commerce Ireland’s annual Thanksgiving lunch where Taoiseach Leo Varadkar said a global agreement on tax must respect Ireland’s 12.5 per cent rate.
Varadkar warned that a major shakeup of the global tax system, which currently allows companies book profits in low-tax jurisdictions such as Ireland to minimise their tax bills, was inevitable.
Intel clears planning hurdle
Chip manufacturer Intel cleared a major hurdle in its proposed €3.6 billion investment at its Leixlip campus this week, which should pave the way for one of the largest single private investments in the history of the State.
The company, which is looking to build a new manufacturing facility, got the green light from An Bord Pleanála, and, while the ruling is open to judicial review, it is now likely to go ahead.
Thomas Reid, the farmer who successfully sued the state over an attempt to compulsorily purchase his land, and serial litigator Peter Sweetman are both understood to be considering a judicial review of the decision.
It was a bad week for Niall McGarry, the founder and majority shareholder of digital publisher Maximum Media, after he confirmed he has stepped away from executive involvement in the Irish side of the business.
McGarry told The Irish Times he will focus instead on its business in the UK, where it launched with its Joe digital platform in 2015. He said he will work in conjunction with the existing management team in the UK.
McGarry’s decision came after media agency Core pulled its campaigns with the publishing group over concerns that traffic numbers for a 2017 podcast were artificially boosted by a so-called “click farm”.
McGarry said that, in light of the controversy, “this is what needed to happen”. He also said he believed that his “personal brand” was “overshadowing” the business.
It was also a bad week for a slightly bigger fish as businessman Denis O’Brien faced questions over whether he will inject equity into Digicel, his telecoms business that operates in 32 markets, under an expected debt restructuring next year.
O’Brien extracted at least $1.9 billion (€1.7 billion) of dividends from Digicel between 2007 and 2014, but refused calls from Digicel bondholders to commit cash to the group last year as it went about restructuring almost $3 billion of borrowings.
Elsewhere, Stripe, the fast-growing online payments firm established by Limerick brothers Patrick and John Collison, saw revenues jump by nearly 80 per cent to $528.7 million (€480 million) at its Dublin-headquartered subsidiary last year.
Climate impacting on business
The impact of climate change on business and the economy could be seen again this week as economist Colm McCarthy warned we could be facing a rise of up to 30 per cent in air fares.
That would be on the back of mooted EU tax increases such as a levy on jet fuel and the application of VAT on airline tickets, although no concrete proposals exist yet.
However, McCarthy, who is also a director of the State airports company DAA, told a tourism industry conference that the European Commission wants to hit jet kerosene with a 33 cent a litre carbon tax.
The Republic stopped taxing air travel in 2013, so customers would feel the full impact of VAT should it be imposed. Most other EU states charge airline passengers in some way or other.
Ryanair said it is opposed to any taxes, given that it will spend €630 million this year on environmental taxes, while the State said it would “engage constructively” in negotiations surrounding proposals.
Finally, convenience food giant Greencore pledged to make 100 per cent of its packaging sustainable by 2025 in a bid to address its waste footprint. The move would reduce its reliance on virgin plastic by several hundred tonnes a year.