Monday 18 November 2019

Noonan's budget was a vegetarian steak sandwich

‘Give everybody something and they will be reasonably pleased’ was Michael Noonan’s plan
‘Give everybody something and they will be reasonably pleased’ was Michael Noonan’s plan
Richard Curran

Richard Curran

Michael Noonan's tax giveaway in the Budget was pretty popular. After all, give everybody something and they will be reasonably pleased. But the reaction from the business community was not exactly one of jubilation.

This wasn't an anti-business Budget or a necessarily very pro-business Budget. It was more like a non-business Budget.

In his taxation package, Michael Noonan made 17 different announcements covering areas like USC, income tax, employers' PRSI and the self-employed. But when you look at the full-year cost to the Exchequer of making those changes, other than the big USC measure, it is tiny.

The USC cut, very welcome indeed for most people, amounted to a cost of €772m. The other 16 measures will carry a total full-year cost of around €170m.

Take out the self-employed tax credit, which goes one third of the way towards equalising treatment of the self-employed with PAYE, and the other 15 measures amount to €109m.

For many business people, it was a vegetarian steak sandwich - not quite what the menu seemed to suggest.

Entrepreneurial types were particularly aggrieved at the capital gains tax changes. Yes, if they sell a business, they can now pay a lower 20pc rate of CGT up to a lifetime maximum of €1m. It sounds reasonable - until you see what is on offer in the UK, where the lower CGT applies at 10pc and has a lifetime ceiling of €10m.

It is true that some start-ups are moving abroad to avail of what they see as a better deal. But it is very hard to gauge the extent to which this is happening and also how many of them will be successful enough for it to constitute a real loss to the Irish economy or Exchequer.

Nevertheless, the idea of attracting well- paid talented people to Ireland, even just to work for Irish or foreign multinationals, could be a bigger issue. It is very hard to justify measures that some business groups wanted, such as a special tax treatment for Irish people who return home after maybe just two years abroad.

Imagine your neighbour returns from London after two years and pays less tax than you do, simply because they went away for a couple of years.

That was always going to be a hard sell to the Department of Finance, Revenue, Michael Noonan and the Labour Party.

One of the problems facing companies that want to attract talented highly qualified people to Ireland is the 55pc marginal tax rates. Noonan can argue that his cuts to the USC have brought it to below 50pc for those earning up to €70,000, which goes some way towards helping. Unfortunately, if these IT programmers come to work in Dublin, they may be hit with ever-increasing rents.

No political deal with Environment Minister Alan Kelly on the rental issue will in time become a business-competitiveness problem and not just a serious social one.

Politically, it was never going to be the time to go out on a limb for employers.

Noonan has put a little more money in as many pockets as possible. As you do before an election.

Hibernia Reit executives get close to big pay day

Shareholders in Hibernia Reit will vote at an EGM on October 27 on a proposal for the company to buy out its investment manager, WK Nowlan Reit Management.

The management team, led by Kevin Nowlan, is in for a big pay day as Hibernia is about to pay a total consideration of close to €20m spread out over the next three years.

They are in line to receive €14.2m to cover the base pay element of what they would have received over the remaining three and-a-half years of their contract.

Then there is the performance bonus payment, which they are due from the year to March 2015, amounting to €5.7m, and a few other bits and bobs.

The management team are due to receive €4.5m in Hibernia shares, after ensuring their staff receive €537,000. Half of the rest will be paid in cash and the remainder in additional shares to management.

The deal was announced back in May, so the shares are priced at €1.17. Given that Hibernia shares are already up at €1.28, the team should do very well out of it. They should end up with around 10 million shares in Hibernia over the next three years.

Nowlan and his team will join Hibernia as executives under service contracts and their pay over the next few years will be included in the total price.

Hibernia can argue that the whole deal will not cost the company any more than if things had stayed as they were. If it is a good deal for Hibernia, then it raises the question of why the management arrangement was structured this way in the first place.

One interpretation is that nobody was sure how well the Hibernia Reit would go - and if things went badly wrong, the investment manager firm, as a supplier of services, could be just cut once its contract was over.

But Hibernia shares have performed well and the firm is so bullish about its performance that it now wants to ensure it keeps the management team, rather than have uncertainty. Hibernia also argues that some investors are prohibited from investing in externally managed firms and taking it in-house should widen the investor base.

Nowlan and his team stand to do very well out of the deal. But it is structured in a way that they won't do any better than if the arrangement had not changed. The whole thing has been a little messy and time-consuming but should result in a better outcome all round.

Dublin's 'breath of fresh air' won't appeal to all

Dublin is finally getting its own tourism brand. But will it work? Failte Ireland is backing a new €1m marketing push specifically for Dublin.

The new catchphrase 'Dublin - a breath of fresh air' and the logo look a little old-fashioned and well, somewhat pedestrian.

I am sure Failte Ireland has done its homework and must believe that having a capital city on the coast and with the Wicklow Mountains nearby is some kind of unique selling point. But who will it attract?

Major city destinations - the likes of your Amsterdams, Berlins, Pragues and Barcelonas - appeal to the young weekend visitor. Failte Ireland must reckon we have enough of the younger party crowd and are looking for the older, more discerning tourist - a sort of collection of continental European Gay Byrne types who will walk Howth Head and get some fresh air.

Thankfully, it is a long way from Arthur's Day.

It will be very difficult to position Dublin for both audiences. But Failte Ireland seems to think the new brand will convey "a new expression of a rare auld thing". It says it seeks to change perceptions of Dublin "from a weak and one-dimensional image to that of a city pulsing with life" (and by one-dimensional, I presume they mean drink).

A new brand just for Dublin is a good thing. The challenge will be staying cool for those noisy "young people", while managing to attract a different group of tourists looking for some fresh air.

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