Business Irish

Wednesday 25 April 2018

Analysis: Summit sound and fury masks the real problems for business

The economy will survive without Paddy Cosgrave's Web Summit - but its departure is a blow to our reputation
The economy will survive without Paddy Cosgrave's Web Summit - but its departure is a blow to our reputation
Hollywood actress Eva Longoria at the Web Summit at the RDS. Pic Steve Humphreys
Gavin McLoughlin

Gavin McLoughlin

Paddy Cosgrave is taking his ball and going to Portugal amid much wailing and gnashing of teeth.

Correspondence between the Web Summit co-founder and Government mandarins has sent ministers on the defensive as they stood accused of not doing enough to keep the tech extravaganza in the capital.

Some of the rhetoric has been extraordinary. In a radio appearance, Transport Minister Paschal Donohoe was asked why the Government hadn't engaged in "bilateral talks" - a phrase used by Mr Cosgrave in his correspondence that this columnist typically associates with war summits rather than web summits - to keep Mr Cosgrave happy.

The Web Summit titan wanted action on areas ranging from transport, to hotel prices, to traffic, to wifi. The idea of a government interfering in the hotels market or telling the privately-owned RDS what it should be doing about its wifi is a tad discomfiting, but in Mr Cosgrave's defence the correspondence doesn't paint a picture of a Taoiseach's department doing everything it could.

For example, over a week after first telling Mr Cosgrave he would respond to an initial query, mandarin Nick Reddy got back to another query with two sentences saying he was on a trade mission in France and would respond.

Highly-amusing jargon redolent of 'Yes Minister' appears later as the civil servants try to placate an increasingly angry Mr Cosgrave: "A high-level task force will oversee and coordinate arrangements for engagement, with subgroups and mechanisms as needed for different strands such as logistics, and engagement with attendees."

There's no doubt that the Summit's departure is a blow to our reputation, Obviously it's better to have it than not.

However, the recovering economy appears well able to withstand the blow. The Web Summit is a glamorous event that inspires much commentary, but in macro-economic terms it's small fry.

Cosgrave even acknowledges that himself, calling it "a tiny dot in the ocean of priorities that truly matter" amid the challenges this country still faces.

But what's not small fry is the domestic Irish SME sector. Calling it the backbone of the economy is a cliché for a reason, yet all the sound and fury about the Summit has diverted attention from the piddling little measures the Government introduced for domestic entrepreneurs in Tuesday's Budget.

Now that the first Paddy Cosgrave is going abroad, this country should be doing its best to bring through the next one.

Richard Bruton - who now spends much of his time mugging in front of the camera as some company announces it's creating a gazillion jobs - has been pushing for that. The jobs minister must count as one of the Cabinet's best performers. He knows what he's doing. Yet his two key pre-Budget demands were largely disregarded. In a letter to the Department of Finance, Mr Bruton's officials called for a "significant reduction" in capital gains tax - charged at the standard rate at a staggering 33pc. That's way out of line with the UK, where Irish entrepreneurs can decamp without much difficulty.

On Tuesday, a reduction came all right, but to a level ten percentage points higher than the UK's entrepreneur relief scheme, which Mr Bruton wanted to mimic. What's more, the cut applies only up to the realtively minor sum (in the context of business) of €1m.

Nor was anything done about the ludicrous tax treatment of share options - an important tool in the armoury of a nascent company that can't afford to attract talent with big pay packages.

Not only are you liable for income tax once the options have been exercised - at which time you may not have turned them into actual money - you're also taxed for capital gains made between exercising the share options and selling the shares.

Bruton wanted an SME scheme that would get rid of the income tax liability and reduce the capital gains tax rate below a certain level. No sign of that in the Budget.

After this year the Web Summit's gone and it doesn't look like it's coming back.

But thousands of Irish entrepreneurs will continue quietly plying their trade, keeping thousands more in jobs, and without a large media profile to win people to their cause. Perhaps we should save the fuss for them.

Irish Independent

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