Macron speech shows how ‘big boys’ of Europe are gunning for us
THERE is no sign of our European partners giving up on the idea of getting global multinationals to pay more tax in Europe, most likely at the expense of Ireland’s investment proposition. In a week when US President Donald Trump was sounding off about slashing American corporation tax, the more ominous signs for us were coming from the Sorbonne University in Paris, compliments of a speech given by French President Emmanuel Macron.
In a major speech on the future of Europe, Macron said divergence in corporate tax rates “feeds a form of disunion, breaks apart our social models. It creates fragility throughout Europe.”
He was echoing recent remarks by his finance minister when he implied that facilitating corporations in paying very low taxes, as he believes Ireland does, is one of the reasons behind the shift to the right in European politics.
In other words, if Irish tax advisers hadn’t come up with things like the Double Irish, there wouldn’t be a Marine Le Pen or an AfD far right party in Germany. I think this is stretching things more than just a little.
Indeed Macron was emphasising greater EU democracy and sovereignty. He wants more eurozone integration with a eurozone budget, finance minister and all the rest. He wants minimum and maximum corporate tax rates to be set in the 2020 EU budget.
More threateningly, he went on to say that access to EU cohesion funds must be conditional on respect for those rates. “One cannot benefit from European solidarity and play against the others,” he said.
This sounds awfully like trying to change the rules by dictating the terms. In Ireland we of course cannot forget the European “solidarity” that was shown when we were threatened by the ECB of the implications of burning bondholders. This contributed to our legacy of €200bn in national debt.
And France is not exactly in a position to lecture anybody about fiscal rectitude and sticking to European rules. France and Germany were the first to break the stability pact guidelines back in 2003 and avoided financial sanction. France has run up a deficit every year since 2007 and will struggle to bring its budget deficit under 3pc next year as it has pledged to do. It must deliver two years below the 3pc threshold to exit an EU excessive-deficit procedure it has faced since 2009. France hasn’t begun to take any of the real pain of tightening public finances.
It is pledging to cut public spending by an extra €4.5bn while also reducing wealth and local residency tax. Attracting a big slice of new tax from digital multinationals might allow it to avoid some of those public spending cuts. But it could come at a price for Ireland.
State bailout of AIB cost us all €3bn more than headline figure
IT was reported in this newspaper at the time of its IPO that AIB would not have to pay corporation tax for the next 20 years. But hearing it come out of the mouth of the bank’s chief executive at the Oireachtas committee meeting last week brought it home. The arguments about the money end up getting fudged. AIB has €3bn in deferred tax assets (DTAs) resulting from its losses during the bad years. If it wasn’t given those, the argument goes, the bailout would have needed to be €3bn more. So there is no additional cost to the exchequer.
But look at it another way. Given that the state did the bailing out, does that not mean the cost of AIB’s collapse was effectively €3bn more than the €20bn headline figure, because it will receive €3bn less in corporation taxes? The circular argument states that with the tax losses, AIB will enjoy higher profits. Because the state owns the bank, the state will get more in higher dividends from AIB’s enlarged profits, and get the money back that way.
However, the state no longer owns all of the bank and is unlikely to own very much of it in five years’ time, when there will still be another 15 years to run on the tax losses. The state is already recouping €60m per year from AIB through the bank levy and that is legislated to run until 2021. At least that is something. If AIB makes €1.6bn in profit this year, its tax bill should be around €200m. The private investors who own 28pc of AIB are benefiting from their pro-rata share of that tax bill which would be €56m this year.
There is also a point of principle here too. It goes like this: A bank that recklessly lost so much money and had to be bailed out by the state, should not be able to avoid paying corporation tax to the state (Revenue Commissioners) on its profits in the future on foot of its reckless losses of the past.
Paddy Power’s late great Pauline conversion on “toxic” FOBTs
PADDY Power Betfair has undergone a “Pauline conversion” on the issue of lowering the maximum bet on fixed odds betting terminals (FOBTs) in British betting shops. Described by some as the “crack cocaine” of gambling, punters can bet £100 every 20 seconds on FOBTs and they can be a source of enormous misery for gambling addicts.
The British government is in advanced stages of a report which looks set to recommend slashing the maximum bet, possibly to as low as £2. Betting chains in Britain have been fighting hard and lobbying to retain the limit or only have it slashed to around £30.
But Paddy Power Betfair chief executive Breon Corcoran broke ranks and wrote a letter to the Department saying FOBTs had become a toxic social issue and bets should be dropped to £10 or less.
First of all, Corcoran has done a positive thing and that should be acknowledged. But his competitors are questioning the move, saying it will give Paddy Power Betfair a commercial advantage because it isn’t as reliant on FOBTs for revenue.
A cut to £2 would cost Ladbrokes £449m in lost revenue, while William Hill would see revenues fall by £284m. Paddy Power would see a £55m drop in revenue.
While Corcoran’s view might be good for tackling problem gambling, there are a few home truths here too. Firstly, he is leaving the company and will become the third former director of Paddy Power to question the value of FOBTs. Former director and Paddy Power founder Stewart Kenny and former chairman Fintan Drury have gone on record criticising them in the past.
Corcoran’s timing is interesting because it has come very late in the process. The committee has been reviewing this issue for a long time and is due to report next month. Why not say it earlier and why not say it publicly? Corcoran’s stance came in the form of a letter written last month to the Department rather than a public statement.
It is still true that somebody could bet hundreds of pounds in seconds playing some of Paddy Power or other online games.
It is debatable whether it is easier to monitor a person’s gambling online or in the corner of a betting shop.
Either way, Paddy Power has probably secured a nail in the coffin of FOBTs. Despite the ire it has drawn from the betting fraternity in the UK, that can’t be a bad thing.