These have been testing times for the Government, bracing itself for Britain’s EU exit and attacks on the State’s corporate tax regime from both Europe and the United States.
This week, the challenge facing the Republic became a little clearer as US secretary of the treasury Steven Mnuchin confirmed president Donald Trump will seek to cut US corporation tax to 15 per cent as part of sweeping changes to America's tax code.
The move – which has to be approved by Congress before it becomes law – would bring the US rate almost in line with the Republic’s rate of 12.5 per cent, stripping the State of a key strategic advantage in luring foreign direct investment.
Consultancy firm Deloitte warned the cut could choke investment in the Republic's pharma and medtech sectors, which are heavily reliant on FDI.
One significant silver lining for Michael Noonan was the absence of a border adjustment tax from Trump's plan. The tax would have applied to Irish exporters who are already reeling from Brexit.
Noonan was keeping his cards close to his chest after the announcement, pointing out that it was so far light on detail and would require political agreement in the US, something that many see as difficult to achieve. “We really don’t know where it will land until we see the detail of it,” he said.
Taoiseach Enda Kenny said the Government would not be changing the rate of corporation tax here to compensate. “It is a matter of national competence,” he said. “We will not be changing our corporate tax rate.”
Kenny added that US companies were attracted to Ireland because of “the quality of the talent pool”, and the Irish education system, which he described as “nimble and flexible enough to meet the challenge”.
EU threatens Ireland’s tax rate
In Europe, the vista before Kenny and Noonan isn’t much better. Plans are afoot to introduce the Common Consolidated Corporate Tax Base (CCCTB), which Ibec, the business lobby, says will deprive the State of about €4 billion per year.
Under the proposal, companies would submit one centralised tax return across all EU countries in which they operate. Their taxable profits would then be split between the member states they operate in, with states retaining the right to set their own tax rate.
Ibec, in its submission to a review of Ireland’s corporation tax regime, said the Republic would be the worst hit of all 28 EU states, and that Noonan could kiss goodbye to about 50 per cent of the entire corporate tax base.
"Ireland would lose over 50 per cent of its taxable profits under this formula, with larger low-exporting countries such as France gaining over 73 per cent to its corporate tax base," Ibec's chief economist Gerard Brady said.
Meanwhile, the Revenue Commissioners published its annual report on Thursday, revealing that just 10 firms paid nearly 40 per cent of the Republic’s corporation tax last year.
Corporation tax receipts have surged in the past two years, rising 57 per cent to €7.35 billion – something that has been linked to the global clampdown on multinational tax avoidance.
Overall, Revenue said it collected €47.95 billion for the exchequer in 2016, with “significant year-on-year increases” recorded in each of the main categories. Taxes on income were up 4.5 per cent; VAT was up 4.2 per cent; and corporation tax was up 7 per cent.
Revenue also extended the deadline for people to come forward and disclose overseas assets.
It’s currently embarking on a clampdown that applies to anyone who has an asset outside the Republic or who receives income in another country.
The tax authorities have said they will accept voluntary disclosure of money or assets abroad on which tax should have been paid before next Thursday, after which penalties will apply.
AIB fined €2.3m
It’s been an eventful few days for AIB, which hosted its annual general meeting the day after it emerged that the bank had been slapped with a €2.3 million fine by the Central Bank.
The fine was for six breaches of legislation designed to tackle money laundering and terrorists financing. AIB was guilty of “significant failures” in its controls, policies and procedures, the Central Bank found.
This was the biggest fine levied against AIB by the Central Bank and follows a €3.3 million fine issued last year to Ulster Bank for similar breaches.
Responding to a question at the agm, chairman Richard Pym said: "This is a stain on the firm but the bank is now in a much better place in terms of its controls."
In relation to the tracker mortgage issue, Pym was, again, reaching for the Persil. This was “another stain” on the company, he said. AIB apologised last year for failing to ensure that all of its tracker mortgage customers were on the correct interest rate. About 3,000 loan accounts are believed to have been affected.
Apart from all that, the bank is in a much healthier place these days, and Pym said it would be “ready” for an initial public offering (IPO) of its shares whenever Michael Noonan pulls the trigger.
“Any decision is in the hands of the Minister but the bank will be ready when he decides and a successful conclusion would be another important step in the rehabilitation of AIB,” he said.
Noonan later said he hadn’t decided on any particular date yet, but that the snap UK election and any accompanying market turmoil won’t affect matters. “What we have said is the window of opportunity for a variety of reasons is between mid-May and early-July and the UK election doesn’t interfere with that window.”
Ardagh in hot water
Glass and metal containers company Ardagh was in hot water after a US jury ordered it to pay $50.3 million (€46.2 million) to a company that claimed it infringed a patent.
The dispute if over technology that turns mixed colour glass into recycled glass of a single colour.
After the decision in Delaware in favour of the patent holder, Green Mountain, Ardagh said it would appeal the case. “Ardagh disagrees with the decision of the jury, both as to liability and quantum of the damages and strongly believes that the Green Mountain case is without merit,” it said. “Ardagh will vigorously pursue all options, including appeal.”
Before you go feeling too sorry for them, the company also reported a 38 per cent increase in earnings in the first quarter of the year, following on from its biggest ever acquisition in mid-2016.
Earnings before interest, tax, depreciation and amortisation rose to €299 million from €217 million for the year-earlier period, the company said in a statement on Thursday. Revenues for the period rose by more than 50 per cent to €1.84 billion.
It raised more than $300 million last month in an initial public offering that saw the group list on the New York Stock Exchange. The company currently has a market capitalisation of $5 billion.
‘When shareholders do very well, I do very well.’
A number of companies reported results this week, including Glanbia, which, in the three months to April 1st, increased revenue by 9.6 per cent on the back of a recovery in global dairy prices and its acquisitions.
Elsewhere, buildings material company CRH was forced to defend the building its €300 million-plus investment plans in the Philippines as sales in the country, which it entered in 2015, slumped.
That didn't stop Albert Manifold, the company's chief executive, from defending his total pay package of €10 million last year.
Manifold brushed off concerns over levels of executive pay from some shareholders at the company’s agm. “When shareholders do very well, I do very well,” he said.
