Business

Dublin nervy as Trump scores biggest win of presidency

Business Week: Central Bank flexes muscles; big changes at Eir; and Ryanair’s woes

US president Donald Trump celebrates after congress passed sweeping tax overhaul legislation. Photograph: Jonathan Ernst/File Photo/Reuters

Colin Gleeson's face
Colin Gleeson
Sat Dec 23 2017 - 09:00

US Senate Democratic leader Chuck Schumer stared deadpan over the rim of his glasses on Wednesday as he addressed US senators preparing to vote on president Donald Trump’s signature tax reform bill.

“What a disgrace,” he said, slowly and deliberately. “That’s what this bill is. It’s an absolute disgrace. It’s not just an ideological difference. It is something dramatically opposite of what America needs.”

Moments later, US vice-president Mike Pence addressed the chamber. “On this vote, the Ayes are 51. The Nays are 48.” With that, US president Donald Trump scored the biggest win of his presidency, navigating the $1.5 trillion bill through Congress.

Trump is now just a stroke of his pen away from enacting the most sweeping overhaul of the US tax code since Ronald Reagan in 1986. “I promised the American people a big, beautiful tax cut for Christmas,” he said afterward. “That is exactly what they are getting.”

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The centrepiece of the package is a major cut for corporations, which will see their headline income tax rate plunge from 35 per cent to 21 per cent, bringing the US broadly into line with the average rate in the developed world.

Economic analyses predicted it would add more than $1 trillion to US budget deficits over the next decade, while Washington think tank the Centre for American Progress said the changes would personally save Trump about $11 million-$15 million per year.

Of course, the aftershocks of that earthquake in Washington will be felt more than 3,000 miles away in Dublin. Just how much it will affect our ability to attract investment remains conjecture – but, no doubt, we now have a smaller carrot to dangle.

Another key measure is a 15.5 per cent tax on cash piles held overseas by US companies. That means there will be little financial advantage for Apple to continue fighting the European Commission ruling that it must pay €13 billion in back tax to the Republic.

The tech giant will have to pay the tax in the US if it does not pay it here – and pay the legal bills to boot.

Everything is fine

The Central Bank has been busy this week, slapping two institutions with fines of more than €200,000 this week, while also looking to draw a line under the tracker mortgage scandal which, it emerged, could ultimately cost €1 billion to resolve.

Minister for Finance Paschal Donohoe issued an update on Wednesday that the number of identified affected customers had grown by 13,600 to 33,700 since September.

Ireland’s five main banks, which account for almost all identified cases, have so far signalled the scandal will cost up to €890 million to resolve. However, since AIB and Ulster Bank are still dragging their heels with the final numbers, this is expected to rise further.

AIB is adding to provisions for cases it disclosed on Wednesday, while Ulster Bank remains in talks with the Central Bank on identifying more affected customers. It’s thought there could be as many as 3,000 as-yet-unidentified people also caught up in it.

That came as sources said banks had so far admitted that at least 37 borrowers lost their homes as a result of the controversy. This number has grown from 23 in the past two months, and is expected to rise further. The number of buy-to-let property losses remained at 79.

In a move that will be welcomed in many quarters, the Central Bank hired criminal lawyers to help it prepare any documentation that could be passed on to An Garda Síochána for investigation.

Meanwhile, the Central Bank fined Merrion Stockbrokers €200,000 for allowing employees to carry out certain functions without ensuring they complied with its fitness and probity requirements. It was the first time the regulator has taken such an action.

Separately, the Central Bank imposed a fine of €210,000 on an asset management company for failure to adequately protect investors. BCP Asset Management admitted what were “significant failures” by the firm in respect of “client categorisation”.

Michael O’Leary’s Christmas

Ryanair boss Michael O’Leary will be hoping for a change of recent fortunes when he attempts to win the €150,000 Leopardstown Christmas Chase for the fourth year in a row next week.

Even a win on St Stephen’s Day is unlikely to do much to ease the pain of recent months, which reached a crescendo when O’Leary was forced to row back on his long-standing policy of not recognising trade unions.

Indeed, Ryanair’s chief operations officer, Peter Bellew, was heard to tell pilots that the culture and tone of working at the airline “has gone very miserable ... even in our head office” in a private recording that made its way into the public domain.

In the end Ryanair executives held landmark meetings with Impact representatives to avert a pilot strike that would have been devastating to customer confidence following the cancellations that followed the rostering mess some months ago.

The threatened strike was aborted by Irish pilots, but captains associated with German union VC carried out a four-hour stoppage on Friday. That was after talks collapsed over a row when the airline refused to deal with two union members.

That’s not the only headache for O’Leary. The airline is to be investigated by two UK parliamentary committees following claims of staff being underpaid, having to pay for their own uniforms and incurring fees when they leave.

VHI eyes private hospitals

The make-up of some of the State’s major infrastructure could be quite different before long after it emerged that health insurer VHI is looking at acquiring private hospitals, while telecommunications firm Eir’s main shareholders are set to sell a 64.5 per cent stake.

VHI, which is State-owned, is understood to have made approaches a number of months ago about purchasing the 200-bed Beacon Hospital in south Dublin, which is controlled by businessman Denis O’Brien, but the bid didn’t come to fruition.

Another possible target for VHI could be St Vincent’s Private Hospital, which is part of the overall St Vincent’s Healthcare Group that also operates the publicly funded St Vincent’s University Hospital and St Michael’s Hospital in Dún Laoghaire.

Eir, meanwhile, is about to come under new ownership. Its main shareholders are to sell a 64.5 per cent stake to two companies controlled by French telecoms billionaire Xavier Niel in a deal that values the phone group at €3.5 billion.

The deal, which is subject to regulatory approval, will also see Eir’s chief executive of three years, Richard Moat, exit the company with a possible multimillion-euro windfall. Some 45 members of senior staff are to share €100 million in exchange for their shares.