Irish

Wednesday 20 August 2014

TH€ PUNT: Terrifying Budget scenario

Published 14/11/2012 | 05:00

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HOUSEHOLDERS will be hoping that consultancy firm Grant Thornton is using shock tactics to sketch out the worst that could happen in next month's Budget.

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That is because if the scenarios that Grant Thornton outlines come to pass it will result in financial mayhem for households.

PAYE households may have to pay over €3,000 in additional taxes next year, according to the analysis published yesterday.

The figures are based on a combination of increased PRSI and universal social charge contributions, reduced pension relief and a property tax.

Grant Thornton reviewed a range of scenarios to assess the impact of expected changes, which show tax increases for families of between €3,000 and €9,000, depending on salary levels and family circumstances.

The firm anticipates an increase in the universal social charge, and employee PRSI to be extended to non-employment income such as dividends and rents on property investments.

A reduction in tax relief on pension contributions from the current 41pc for higher rate taxpayers to 20pc is also anticipated.

That one will be a test of the power of the mandarins, because an alternative way to get savings from pensions would to cap the size of pension that could be built up from tax reliefs at €60,000 a year.

But then, senior mandarins and politicians would lose out, while ordinary workers would suffer. One to watch.



Vernon's firm is sitting pretty

It used to be that trading within a company's debt covenants and meeting repayment targets was the corporate norm.

In The Punt's day, meeting obligations was regarded as, well, obligatory.

The debt crisis did for that, we know, but even so, is it really something to crow about?

Property survivor Stephen Vernon seems to think so.

Accounts just filed for his Green Property Ltd, just one company in the wider Green Property empire, make a point of spelling out that it is "comfortably" meeting all targets and expects to remain "fully compliant" with the terms and conditions on all of its loans.

In fairness to the English-born investor, it's a pretty remarkable state of affairs for an Irish property venture, and a big one at that.

Green Property Ltd appears to be sitting pretty though, controlling net assets of €505m and only suffering a paper loss in the year to the end of June 2011 because of an accounting writedown of a mere €4.48m on the assets, according to accounts that The Punt suspects were a rare pleasure to file.



Excitement on bond markets

It seems bond deals are the new buses, none for ages and then three come along at once. It's been a while since we have seen three Irish bond deals priced in a week but that is now a very real prospect.

Traders in Dublin have been up to high-do over the past two days after the ESB's second bond in three months was followed by Bank of Ireland's barn-storming return to the markets after a two-year absence yesterday.

Both borrowers were inundated with investor demand, with €6bn of buyers' money on the table for just €500m of new debt issued by ESB.

That strong demand bodes well for the €500m that the NTMA is looking to pick up tomorrow.

The frenzy of investor interest in the wider Irish story is not something that tends to register too much at home.

This week's deals show that money managers are now prepared to put their hand in their pocket and lend to Ireland Inc, not just the State, and not just on a one-off basis.

One reason for that is because of the low returns on investment available in the likes of Germany or the US, driving money managers to seek out decent returns, including in Ireland

Alltogether, it's a good news story The Punt has been delighted to report.

Irish Independent

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