There is only one serious question to be asked about the end of the uniform 12.5pc Corporation Tax rate. What will it cost us?
But nobody really has the answer on what the real impact of a 15pc effective tax rate will be on Exchequer finances, or on the level of future inward investment.
There are a few reasons for this. Firstly, we aren’t just going from 12.5pc to 15pc, because the new rate is an effective tax rate. In other words, that is the amount that will have to be paid.
The headline tax rate of 12.5pc had a whole set of accompanying tax rules and protocols for it.
We don’t really know what the accompanying protocols will be now.
Put another way, the real devil is in the detail about what the profit base is, on which this tax will be paid. What kind of carve-outs, offsets, deferrals, treatment of R&D and intellectual property accounting rules will apply?
The original OECD agreement which was signed off by 136 countries was unbelievably thin and vague about this kind of stuff. Yet the precise workings of it will feed into what kind of competitive advantage Ireland can retain for inward investment.
Before this deal was struck, we heard a lot about the other pillar of this initiative – to make companies pay more tax in the countries in which they do business. The Department of Finance estimates that it could cost the Irish Exchequer around €2bn per year.
There were strong suggestions that a minimum effective tax rate could end up costing Ireland a lot more. Yet in recent days very few people have been willing to stick to that view or attempt to put a figure on what the change might cost.
For Ireland this is not such a bad deal. The 15pc rate is a lot lower than 18pc or 21pc for example, and there are assurances that it will not go up any time soon.
Successive governments here have been obsessed with providing certainty around the rate, and up to now they have stuck with it.
This is all the more extraordinary, given that in the depths of the IMF bailout, with billions in cuts made to public services, the rate stayed the same.
If Ireland’s competitive edge on tax is undermined by this policy change, then large corporations will have to find somewhere else to locate new inward investment.
It isn’t at all clear where that might be. The UK is out of the single market. Places like France are not hugely attractive for the sort of investment Ireland has received. We still have a lot to offer and we cannot be undercut on tax by other smaller countries, because they have also signed up to the OECD initiative.
The greater danger for Ireland would be a strong move in the US towards America First, begun under Donald Trump but also continued to some extent by Joe Biden.
Changes to the US tax code or additional incentives to retain investment in the States would undermine the amount of new FDI going to Europe – which would reduce the size of the cake we are competing to win.
The corporate tax rate for large multinationals is going up to 15pc. The sky hasn’t fallen in. Nobody is talking about leaving. We still have a very competitive offering for new investment. Perhaps we should have done it sooner.
Smaller Irish businesses will breathe a sigh of relief that their corporation tax bill won’t be going up to 15pc. The European Commission has agreed on keeping that distinction.
Ironically, back when we had a 10pc corporate tax for manufacturing and IFSC companies, it was the European Commission which put pressure on Ireland to keep moving towards a single corporate rate. Which was how the 12.5pc for all companies came about at the end of the 1990s.
Lots of smaller Irish businesses were worried they would end up paying the price of Covid with a new higher rate. But by breaking the link between the giants and the others, there is very little to stop the Government from edging up the 12.5pc on smaller companies in the future.
‘Where there’s muck there’s brass’, is how the old saying goes. Heading into this winter, the energy crisis is prompting hedge fund investors to make fortunes by investing in the so-called ‘dirty’ industries.
In recent years the potential returns of going green have dominated headlines, but a shortage of coal and gas is bringing in big returns for investors.
As more green-conscious investors opted out of oil, gas and coal shares, it left a gap for shorter-term speculative buyers.
Billionaire hedge fund investor Crispin Odey told the FT that as big institutional investors were so keen to get rid of oil assets, they had left “fantastic returns” on the table. His European fund is up more than 100pc so far this year.
Shortages of coal for power generation in China and India have driven up coal-mining shares in recent months. In Australia, Whitehaven Coal has seen its value rise by 50pc since August.
In the US, the Energy Information Administration recently said it expects coal demand from the US electric power sector to increase by 100m tonnes in 2021 and export demand to rise by 21m tonnes compared to 2020.
In the US, Alliance Resource Partners is up 104pc so far this year, Peabody Energy Company is up 627pc, and Alpha Metallurgical Resources is up 296pc.
There are real worries emerging about the security and cost of gas supply to Ireland over the coming years, which could seriously affect our power generation capability, unless Vladimir Putin decides to turn on the taps to Europe.
Even coal is making a (hopefully) short-term comeback in power generation here. So far this year coal has comprised 10pc of the fuel mix used to generate electricity, compared to just 2pc last year. And in recent weeks, when we had unusually low levels of wind power, the mix hit 17pc at times.
Fixing the mica crisis for thousands of home owners could now cost the State up to €3.2bn. It is a controversy about delivering justice to people who have done nothing wrong, but have been serious victims of State and private sector failures.
Housing Minister Darragh O’Brien is in a real pickle about how to fix it – and at what cost. He promised to legally pursue those who knowingly supplied mica-affected building blocks from quarries. Fair enough, but what about telling taxpayers how all of this happened?
We need to know about the State’s role in the failure to regulate. Did local authorities have a role in providing regulation? How could all this have happened?
The Department of Housing’s draft report made no reference to the idea of a public inquiry.
Surely if €3.2bn of taxpayers’ money is going to be spent fixing it, everyone deserves to know what happened? At the very least to ensure the same thing cannot happen again.