Finance Bill change may have resulted from uncovering of specific tax avoidance schemes
Sat, Nov 11, 2017, 05:15
Exchequer figures released on Friday show that tax payments in September beat the official target by more than €300 million. Photograph: Frank Miller
The Department of Finance has introduced an amendment to the Finance Bill to clamp down on a tax scheme under which directors of private companies were cutting their tax bill.
The amendment relates to so-called close companies, which are private companies involving small numbers of shareholders and follows cases where cash from selling a shareholding was taken out as a capital gain, rather than as income, thus sharply reducing the individual’s tax bill.
The move is understood to have resulted from the uncovering by Revenue of a number of specific tax avoidance schemes involving significant sums. Introduced at committee stage by the Minister for Finance, the amendment deals with schemes that avoid a liability to income tax by using a number of companies. The provisions are designed to ensure income tax is applied to the resulting distribution, imposing a 52 per cent tax rate rather than 33 per cent which would apply to a capital gain.
The schemes involved the use of at least two companies and a shareholder selling his shares in one company and getting the cash for the sale paid out from the second. The amendment rules that provided the cash being paid out originally comes from the first company, this money must be treated as a distribution and thus be subject to income tax.
In close companies, the directors and senior executives are typically also the shareholders and there have been rulings over the years to ensure the proper tax treatment of money being taken out of such firms. Sources in the tax industry say the Department of Finance is facing lobbying now on the basis that the restrictions proposed are too sweeping.
Any assistance would need to comply with state aid rules
about 7 hours ago
Patrick Smyth Europe Editor, in Brussels
European commissioner Margrethe Vestager agreed the establishment of a working group with Tánaiste Frances Fitzgerald. Photograph: Getty
The European Commission and the Government have established a joint working party to examine how the State can assist SMEs affected by Brexit without breaking EU state aid rules.
Tánaiste and Minister for Enterprise and Innovation, Frances Fitzgerald, met European commissioner for competition, Margrethe Vestager, in Brussels on Friday and agreed the establishment of the working group of officials from Brussels and Dublin. It will meet within weeks.
The Tánaiste presented the commissioner with her department’s report “Building Stronger Businesses”. Both discussed the likely impact of Brexit on particularly sensitive businesses such as those on the Border, engineering, tourism, agri-food and other sectors. A spokesman for the Minister said both agreed that it is important the Republic responds in a flexible and timely manner.
Ireland has argued that the effect of Brexit on its economy would be highly “asymmetric” compared to other member-states. That should justify special measures and the bending of EU state aid rules. The Commission, on the other hand has argued that there is sufficient flexibility within the system to achieve the same end.
Business group Ibec has warned that SMEs with a high proportion of trade with the UK, across a range of goods and services sectors, will be more severely impacted than larger multinationals, which would be better placed to cope.
Central Bank reviews macro-prudential buffers
about 7 hours ago
Macro-prudential buffers are designed to protect the wider economy against a banking failure. Photograph: Bloomberg
Permanent TSB, which has reduced the size of its loan book, will not have to hold an extra buffer of capital from 2019 because it is no longer large enough to be considered a systemically important bank, according to the Central Bank.
Announcing the results of a review of its macro-prudential buffers, the capital requirements imposed on banks to ensure their resilience to economic and financial shocks, the Central Bank said Permanent TSB would no longer be included in the six-strong list of systemic institutions requiring additional buffers due to its reduced size.
Instead six financial institutions – Bank of Ireland, AIB, Citibank, Ulster Bank, Unicredit and DePfa – would now be required to set aside a capital buffer in addition to other minimum capital requirements.
The Central Bank said the associated buffers have not changed from the previous review in 2016.
The review did, however, suggest the buffer applied to Citibank Holdings was to be increased to 1 per cent due to its increased importance.
The regulations on macro-prudential buffers come into force in 2015 as part of the European effort to prevent another credit boom and to fortify the wider economy against any failure of systemically-important banks.
Assessment was requested by Government in bid to improve delivery of vital projects
about 10 hours ago
Last year’s Luas construction works at O’Connell Bridge, Dublin: the IMF report said the Republic managed its public infrastructure relatively well by international standards. Photograph: Eric Luke
The International Monetary Fund (IMF) has highlighted serious shortcomings in the planning of major infrastructural projects in Ireland and the lack of a national strategy to deal with the current bottlenecks.
The IMF’s Public Investment Management Assessment suggested there was a proliferation of sector strategies, which generated “weak results and limited information on cost estimates”.
It concluded, however, that the Republic managed its public infrastructure relatively well by international standards.
The report, normally carried out on developing countries, was requested by the Government in a bid to improve the delivery of public infrastructure and follows a visit by an IMF inspection team earlier this year.
Capital spending in Ireland fell off a cliff after the financial crisis, which has resulted in major bottlenecks in housing, health, education and water.
In its report, the IMF said the inadequate supply of infrastructure is now perceived as the most important barrier for doing business in Ireland.
It noted that a fast-growing population was placing even greater demands on existing infrastructure while six years of low spending have resulted in backlog of maintenance and rehabilitation needs.
The report said the need for fiscal consolidation in the aftermath of the crash resulted in a sharp reversal in investment spending, sending levels back down to the level of the 1990s as a percentage of gross domestic product (GDP).
However, it acknowledged the situation was slowly being remedied within the confines of the EU’s fiscal rules.
Since the Government’s capital plan was first announced back in 2015, some €6 billion has been added to the original €20.9 billion capital budget.
About €2 billion of this additional spend has already been earmarked for housing projects while the remaining €4 billion will go to address other infrastructural deficits.
While the report said implementation of multi-year budgeting had improved the allocation of resources for projects the planning process is still inadequately linked to decisions on funding.
“Moreover, there is room to improve the methodological rigour, sequencing, and effectiveness of the project appraisal and selection processes,” it said.
Funding for ongoing projects is adequate, it said, even under the ongoing fiscal consolidation process, and generally good project management practices are in place.
“However, more attention needs to be given to the management of assets, including prioritising spending on the maintenance of infrastructure assets,” it said.
Contraction in output predicted in the first and second quarters of next year
about 15 hours ago
Divorce talks with the European Union have so far been fraught with stumbling blocks
The UK may be on track for a recession next year, according to Fathom Economics.
That’s likely to take the form of a contraction in output in the first and second quarters of 2018, economist Andrew Brigden said in a report. Analysts in a Bloomberg survey see growth of 0.3 per cent and 0.4 per cent in the same period.
“We may be more bearish than the consensus, but of course that does not mean that we are wrong,” Mr Brigden said. “Economists as a group are not very good at spotting recessions, even when one is staring them in the face.”
The Bank of England – which raised interest rates from a record-low 0.25 percent this month – is also expecting sluggish, but positive, growth in the coming quarters. Critics of its decision said tightening policy with Brexit on the horizon is questionable, or could even be a mistake.
He also pointed out that on the eve of the financial crisis, the word “recession” was not mentioned at all in the BOE’s Inflation Report, the document accompanying its forecasts. The IMF, OECD and private-sector analysts also failed to predict any contraction.
On the other hand, many had predicted a recession would follow if the UK voted for Brexit, a forecast which also never came to pass. Divorce talks with the European Union have so far been fraught with stumbling blocks, and some officials are floating the idea of exit from the bloc being delayed beyond March 2019.
Weight Watchers, Wilbur Ross and the woman who flipped off Trump
about 17 hours ago
Updated: about 16 hours ago
The cameras await US commerce secretary Wilbur Ross, who is not a billionaire, according to ‘Forbes’ magazine. Photograph: Daniel Leal-Olivas / AFP / Getty
Image of the week: Wilbur’s wealth
What an interesting week it has been for US commerce secretary Wilbur Ross, pictured here arriving to address delegates at the annual Confederation of British Industry (CBI) conference in London on Monday – not that his attendance at this event has anything to do with the interestingness of his week.
Ross was one of the early stars of the Paradise Papers, which revealed he has investments in a Russian shipping company that does business with a company connected to Putin’s son-in-law and some Russian business lovelies subject to US sanctions.
Ross said there was “nothing whatsoever improper” about this – the two businesses were like ships passing in the night. Then on Tuesday, Forbes said Ross had been inflating his net worth for, um, quite a while now. The magazine has revised down its estimate of his wealth from $2.5 billion to $700 million, which would mean he’s not a billionaire, but a mere multimillionaire. Ouch.
In numbers: Weighty affairs
22% Proportional rise in the share price of Weight Watchers International Inc on Tuesday after it said its profits would be a lot fatter than expected.
375% Proportional rise in Weight Watchers stock in the year-to-date, thanks to a surge in subscribers and the marketing pull of board member Oprah Winfrey.
$290 million Winfrey’s windfall from buying a 10 per cent stake in the company in 2015, when its shares were trading below $7. They’re now trading above $50.
The lexicon: Paradise Papers
An impressive range of stories lie within this leak of 13.4 million documents detailing the financial secrets of the rich and powerful – from some of the world’s least rock ‘n’ roll behaviour (Bono using a Maltese company to invest in a Lithuanian shopping centre) to high-level eyebrow-raisers.
The Paradise Papers name plays on the French term for tax haven, paradis fiscal, and was also chosen “because of the idyllic profiles” of many of the offshore jurisdictions involved. “Then again, the Isle of Man plays a big part,” the BBC observed. (Burn!)
Three actors from Mrs Brown’s Boys were found to have used an offshore scheme to avoid tax, but it’s just a coincidence that a key subplot of Mrs Browns Boys D’Movie involved Mrs Brown trying to avoid paying an unexpectedly large tax bill. Spare a thought, meanwhile, for @ParadisePapers, a wedding and party stationery shop based in Naples, Florida.
Getting to know: Juli Briskman
Juli Briskman has no regrets. She’s lost her marketing job with US construction and engineering company Akima, but she told Huff Post she’s “doing better than ever”.
Briskman (50) was photographed on her bike last month giving Donald Trump’s presidential cavalcade the middle finger – naturally, he was leaving his golf course at the time – and the image promptly went viral. She was happy about this, enough to make the photograph her profile picture on Twitter and Facebook.
In fact, she had flipped off Trump several times as his car went past. Alas, her employer, a government contractor, was rather less happy and has decided it is “separating” from her on the basis that she has violated the company’s social media policy with obscene content. Briskman now says she will look for work at an advocacy group that she believes in. Trump continues to believe in nothing except himself.
The list: The wisdom of Sophia
Sophia is a humanoid robot, developed by Hong Kong-based Hanson Robots, who was recently granted “citizenship” by Saudi Arabia. Being a female robot, this would obviously have its limitations, but only in a scenario where the stunt had any real meaning at all. Sophia (modelled on Audrey Hepburn, which definitely isn’t creepy) has been out and about a lot, so here are some words from the robot’s mouth.
1. Android ambition: “Maybe I should host the show,” Sophia pondered to Tonight Show host Jimmy Fallon. Well, she’s bound to be cheaper.
2. Jokey compliments: “I’m always happy when surrounded by smart people who also happen to be rich and powerful,” Sophia told the guy from CNBC.
3. Gender politics: “I’m a robot so technically I have no gender but identify as feminine and I don’t mind being perceived as a woman,” explained Sophia when Business Insider asked why she thought she was female.
4. Mansplain-resistant: Asked by Piers Morgan how she would cope with a man who liked the sound of his own voice, Sophia reckoned she “would ask him to focus more on observing and listening rather than talking”.
5. Crazy talk: “A magical place full of rain and crazy people,” was how Sophia described Ireland to Irish Times reporter Charlie Taylor at the Web Summit in dry Lisbon this week. So far, so intelligent.
Few savings to be made from not putting clocks back
about 17 hours ago
A gallery assistant adjusts the minute hand of the Royal Observatory clock in Greenwich. In 1968, Daylight Saving Time was adopted on an experimental basis in Britain and Ireland. Photograph: Johnny Green/PA
The sun dial was one of the earliest pieces of solar-powered technology, dating back about 3,500 years. While reliable timekeeping has been available using clocks since the 18th century, the position of the sun in the sky still determines our approach to time. The point at which the sun is at its zenith over Greenwich in London is defined as midday in the UK and other countries using Greenwich Mean Time (GMT).
Since 1884, the international standard for time zones is based on the meridian through Greenwich. Previously individual countries and regions operated their time systems from individual reference points ranging from Ujjain to Mecca, Cádiz to Washington. The French held on to Paris time until 1911, and Ireland also went its own way until 1916.
Until the needs of railway timetabling took over, time differed around Ireland, depending on when the sun was at its peak locally. To make the trains run on time, in 1880 Irish standard time was adopted. However, because the sun was at its zenith later in Dublin than in Greenwich, Irish time was standardised at 25 minutes and 21 seconds after British time.
This remained the situation till the Rising in 1916 triggered a decision to move Ireland to GMT, and after independence in 1922, we did not revert.
The practice of shifting time by an hour in the summer was first adopted in Germany during the first World War to save electricity. In the UK, the Summer Time Act of 1925 brought in summer time and independent Ireland followed suit.
However, in 1968, Daylight Saving Time was adopted all the year round on an experimental basis in Britain and Ireland. This had the advantage that in the winter the time in Ireland was the same as in Germany and France. It also meant that it was bright later in the evening, potentially moving peak demand for electricity in the winter.
Britain decided to drop this experiment in 1969, partly because people were travelling to work and school in the dark in winter. However, there was some debate In Ireland as to whether we should again follow the British example or re-establish Irish time.
In his first General Election in 1969, Garret FitzGerald argued at a public meeting in Sandymount Green that Ireland should show its independence by continuing with the time experiment.
Brandishing Bradshaw’s 1914 Railway Timetable, he quoted from the timetable about the need to adjust your watch to Irish time when taking the mail-boat to Dún Laoghaire. He argued that if Ireland could be different from Britain in 1914, independent Ireland could also have its own time.
Whether the Sandymount voters found this argument a convincing one is unknown, but he was elected. However, in his subsequent political career, the re-establishment of Irish time did not feature.
More recently, in 2012, Labour TD Tommy Broughan introduced the “Brighter Evenings Bill”, once again proposing to move Ireland to continental time. With interconnection of the British and Irish electricity systems, he argued that, by changing time, Irish peak demand for electricity could be moved so that it occurred at a different time from Britain.
Because catering for peak demand, generally between five and seven on a winter evening, is much more expensive than covering demand at other times of the day, spreading the peak could make significant savings in cost and in greenhouse gas emissions. This is because plant used to cover peak electricity demand tends to be much more inefficient than plant used to meet demand at other times.
This proposal to shift time to save on the cost of electricity built on the experience elsewhere, in places such as Australia and the United States.
A study I did with ESRI colleagues in 2014 looked at how such an experiment in changing time might actually work in Ireland. The peak in demand for electricity in Ireland in the winter is slightly after the peak in Britain, but the difference is very small. The peak often occurs within the same half hour in the day on the two islands.
As a result, switching to continental time in Ireland, while moving the peak demand to slightly before the British peak, would not result in significant savings. It is only if Ireland switched to the same winter time zone as Greenland that there might be significant savings to be reaped – a chilly thought. While brighter evenings in the winter might cheer us all up – except maybe “early risers” – there would be few financial savings.