BUSINESS AND THE BUDGET
Richard Curran looks ahead to Tuesday’s announcement,
DON’T expect a big business budget on Tuesday. Finance Minister Paschal Donohoe is facing considerable pressures on spending and tax cuts. He will have to finance a chunk of what he does through tax increases — and business won’t be in a good position to benefit.
It is hard to make a strong case for business escaping tax increases or even getting tax breaks when the economy is growing at such a pace. The emphasis will be on housing, income tax band tweaks and financing anything else from new taxation measures.
First in the line of fire will probably be the special 9pc Vat rate for the hospitality sector. He has some scope to tinker with elements of this to protect smaller restaurants, etc, but by and large it is going one way — and that is up.
The minister has around €800m of new tax cuts and spending increases to play around with it, but anything above that will have to be funded through new revenue-raising measures. He is likely to suddenly embrace the importance of tackling climate change by hiking up carbon taxes. This will hit households with higher fuel and heating bills, but also could prove costly for businesses using gas or paying for higher transport costs. A move to equalise diesel with petrol would also hit businesses as well as motorists driving diesel cars.
Business owners might eye the possibility of a reduction in Capital Gains Tax, but it is hard to see how Donohoe will go down that road, given the overall message he will want to give. He will want to say something like: “Things are going great — but we need to protect the squeezed middle, fix housing and not erode the tax base as we head into possibly choppy waters ahead”.
Another big hope for entrepreneurs is the CGT Entrepreneur Relief where those selling shares in a company they founded pay a lower rate of CGT up to a lifetime limit of €1m. The equivalent figure for the UK is €15m. A shift here would encourage more people to set up businesses in Ireland but the cost of a €15m limit would be around €56m in a full year. I wouldn’t bet on it happening.
The commitment given by former minister for finance Michael Noonan to equalise the tax credit for the self-employed remains unfinished business. When he started it was zero, while PAYE workers had a tax credit of €1,650 per year.
The Programme for Partnership Government states “we will increase the Earned Income Tax Credit from €550 to €1,650 for the self-employed, to match the PAYE credit, by 2018”. There is still a gap with the self-employed credit running at €1,150.
Brexit is still coming and many in business will expect some suite of measures to protect business likely to be most affected. It will be impossible for Donohoe to ignore this so expect a series of very specific, tightly controlled, not open-ended, measures to ‘Brexit-proof ’ business, that won’t actually cost too much. The British are not actually leaving for at least another two and a half years and that could be more like a decade if things go a certain way politically. Who knows, they may even have another referendum and decide to remain. So, Donohoe might feel it is best to announce some minor inexpensive measures rather than commit to Brexit business supports that could prove costly for something that mightn’t happen for a while yet. Expectations around housing measures, which would be good for the construction sector may be overdone. As things stand greater construction activity is already creating an extra 8,000 jobs in the sector every six months. The Government’s problem isn’t with money — the problem is with delays in the system. It needs some new policy measures rather than just throwing more money at the problem.
The economy continues to grow at the fastest pace in the EU, despite storm clouds further out on the horizon. Business will be seen as doing alright and won’t get much.
Naughten chats with the only horse left in the broadband race
COMMUNICATIONS Minister Denis Naughten got himself into a bit of flap by attending a dinner in New York hosted by the only remaining bidder for the National Broadband Scheme. Naughten had a conversation with David McCourt of Granahan McCourt at the dinner. He says that only two things came up. Naughten wanted McCourt’s consortium to provide answers to departmental questions about the bid in a timely way. And McCourt informed the minister that the make-up of the consortium might be changing.
The minister didn’t repeat what he said to McCourt in response to that, but instead says he heard about the new make-up of the consortium when he read it in a newspaper.
The whole broadband scheme process has entered unusual territory given there is only one bidder left. Normally a minister shouldn’t have contact with one bidder in a competitive tender because it could confer an advantage on that bidder over others. But in this case, there is only one bidder.
Nevertheless, Naughten should not have left himself open to the criticism of attending a dinner hosted by the only remaining bidder when hundreds of millions of euro in State subsidies are at stake. You would also imagine that when the bidder informed the minister that the make-up of the consortium was about to change, the minister would ask, who was coming in and who was going out. Yet, that doesn’t seem to have happened based on Naughten’s comments to the media last Thursday. There are 8,000 other restaurants in New York City. Naughten may now wish he had dined instead in one of them.
Gold mine firm Orion places big bet on a return of Stormont
A GOLD discovery in the Sperrin Mountains of Co Tyrone, described as “one of the best gold projects on the planet” continues to be bogged down in delays. When originally discovered in the 1980s, it owners couldn’t get an explosives licence to extract the gold because of the Troubles.
Now decades later, it has emerged as an enormous gold find with an estimated 3.1 million ounces of gold worth around $3bn in the mountains outside Gortin.
The latest owners of the rights, Dalradian Resources, submitted a 10,000-page planning application to develop the mine back in 2017. The submission met with firm resistance from some residents and environmentalists.
The cause of much concern isn’t so much the mine itself but the plans for a new cyanide plant to accompany it. The ore in the area is relatively low grade, so it needs to be mixed with cyanide to extract the gold. Dalradian has insisted it is totally safe.
Another proposed gold mine around 20 miles away in Slieve Gallion in Co Derry is also attracting a campaign of protest. One of those to lend his voice of protest is Declan Donnelly, of Ant and Dec TV fame, who has relatives in the area.
During the summer, Dalradian was bought out by its biggest shareholder, Canadian private equity group, Orion Mine Finance, in a deal that valued the company at around €350m. This week the relevant government department in the North said no decision can be made on planning until there is a government minister in Stormont. Orion has placed a very big bet on getting planning permission.
Never mind securing planning, Stormont might not even return any time soon.