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No-deal Brexit could result in higher taxes for online shoppers

No-deal Brexit could result in higher taxes for online shoppers

Minister of State for European Affairs Helen McEntee has said a no-deal Brexit could result in higher taxes for online shoppers and difficulties in returning goods, as the UK would no longer be subject to the same consumer rights and protections.

Speaking on RTÉ’s Morning Ireland, Ms McEntee said: “If the UK leaves with no deal, in terms of retail they will become a third country, in the same way that you’re dealing with the US or other third countries. There may be possible tax implications.

“Also, and I don’t do it myself, but I know plenty of people who might order five or six dresses, they get them, they try them on and they send a few back. If you’ve already paid taxes on them, how do you negate that?

“You’ve also got the fact that they will no longer be under the same consumer protections and rights.”

Ms McEntee said the situation is “is not going to be as good as we have now” and will cause the economy to slow down, cause the seamless flow of the all-Ireland economy to slow down and cost people their livelihoods.

She described yesterday’s report on Brexit preparations as “damage limitation” and said while the Government did not want to scare people it wanted to prepare them for the “significant challenge” ahead.

Ms McEntee also urged any motorists who live in Ireland and hold a UK driving licence to switch it over before 31 October, as drivers will need an up-to-date licence.

The Government, she said, is doing all it can to prepare for a no-deal Brexit, but admitted that “we’re not fully there yet”.

Ms McEntee could not say where checks on goods crossing the border will be, but said that meetings on the issue will continue over the summer.

She said there were many businesses who have not yet engaged and Government was trying to reach out to help them prepare for a no-deal Brexit.

Meanwhile, Fianna Fáil’s Brexit spokesperson said the Government needs to help small and medium businesses get prepared for Brexit.

Also speaking on Morning Ireland, Lisa Chambers said that the “cliff edge” is getting very close.

She added that the Government’s warnings yesterday were dire but nothing new, and she would have expected to hear about new plans from the Government yesterday also.

Ms Chambers said it is worrying that 40,000 businesses who trade with the UK have not yet registered with Revenue.

She said the Government needed to be more proactive in reaching out to those smaller businesses and hauliers and needed to work closely with these businesses to help them get ready, pointing out that they employ a large amount of people.

“It’s all well and good to say that it’s up to businesses to get themselves ready and that’s fine for a larger company that has plenty of resources that can actually spend the money to get Brexit prepared,” said Ms Chambers, “but most of our businesses are small and medium-sized enterprises and they employ the vast majority of our citizens.

“So the Government cannot take a hands off approach. It really has to be right in there working with businesses to get them prepared.”
President of the Irish Road Haulage Association Verona Murphy said that with the current state of preparation from Revenue and the State agencies for a no-deal Brexit scenario, many of the small and medium enterprise hauliers will go out of business.

Also speaking on RTÉ’s Morning Ireland, Ms Murphy, who will run for Fine Gael at the next election in Wexford, said the lack of financial support for the sector combined with the lack of skill set are to be blamed for the difficult situation hauliers may find themselves in.

“On one level it’s cost because there haven’t been any financial support afforded to the sector. The real reason is (that) the skill set isn’t there for which we can prepare.

“The agencies have done nothing except to prepare themselves. So customs have trained customs agents to deal with some people who have no idea what they’re doing. So more small, medium enterprises in this country will only trade with the UK and there is no bases for them in which to undertake customs courses.”

Ms Murphy added that while she appreciates that the Tánaiste, the Taoiseach, and Ms McEntee have done a great job because they were the ones who “put the structure of consultation in place”, the talks that the association has been involved in for approximately three years now have brought “no result”.

Ms Murphy said that she “absolutely” shares the views of those who claim the preparations for Brexit have been too slow, adding that “frustrations levels are now rising”.

“I asked a simple question of the head of the customs the other day. What sanitary facilities are being prepared at Rosslare for the drivers who obviously are going to be held up through no fault of their own.

“I was told it wasn’t a truck stop. That’s the typical attitude of State agencies, of their superior being displayed upon what – they would possibly regard – as somebody in a lesser position. And that will only serve to increase frustration levels,” she said.

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Irish economic growth for 2018 revised up to 8.2%

Irish economic growth for 2018 revised up to 8.2%

The Irish economy grew 8.2% last year, according to new data released by the Central Statistics Office.

Gross Domestic Product, a measure of the total output of an economy, stood at €324 billion for the year, the CSO said.

But when the profits of multinationals were stripped out, as measured by Gross National Product or GNP, the economy grew at the smaller rate of 6.5%.

The GDP figure is higher than anticipated when the CSO reported provisional data in March, when it was estimated that it would come in at 6.7%.

The growth means Ireland’s debt to GDP ratio now stands at 63.6%, down from the peak of 120% in 2013.

Using Modified GNI*, a different measure of the economy which strips out the skewing caused by the depreciation of foreign-owned intellectual property assets here and the depreciation of aircraft owned by aircraft leasing firms, the size of the economy was €197 billion.

When measured using Modified GNI*, the debt ratio stood at 104%.

Today’s data also showed that Government expenditure rose 4.4% last year.

The significant economic growth in 2018 was driven by a 10.4% rise in exports of goods and services.

Among the areas of the economy where multinationals are most active, growth in the ICT sector registered a 21.2% expansion.

Meanwhile, in the domestically focused economy, the distribution, transport, hotels and restaurants sectors grew by 6.6%.

The positive growth trend continued in the first quarter of this year, albeit at a reduced rate, with GDP growing by 2.4% between January and the end of March.

GNP rose 2.1% during the same period.

The ICT sector expanded by 11.5% over the three months, while in the domestically focused economy, construction activity rose 5.6%.

The distribution, transport, hotels and restaurant sector registered a modest contraction of 0.1%.

On the international trade front, the current account of the Balance of Payments recorded a surplus of €11 billion in flows with the rest of the world between January and March, down from €11.3 billion in the same time last year.

The accounts also include Balance of Payments Current Account transactions with the UK, which show a surplus of €1.4 billion for trade with the UK in the first thee months of the year.

The CSO said this trade surplus was offset by a deficit of €2.9 billion in income flows, giving an overall current account deficit of €1.6 billion with the UK in the quarter.

Computer services exports rose by €5.7 billion in the quarter, compared to the same quarter a year earlier, the CSO noted.

Irish GDP growth has outperformed the rest of the European Union every year since 2014, undeterred by Brexit.

The Government has warned that Brexit could lead to a sudden contraction if the UK left without a transition agreement, which it does not yet have.

The strong first quarter also tallies with striking jobs numbers for the first three months of 2019.

The labour market, already close to capacity with unemployment below 5%, added new workers at the fastest pace since Ireland’s economic recovery began.

Many economists use the labour market as the most accurate barometer of how Ireland’s open economy is doing.

The relevance of GDP diminished when 2015 growth was adjusted up to 26% after a massive revision of the stock of capital assets.

Such distortions, related to the country’s large cluster of multinational companies, inflated GDP again for the last two years.

In its quarterly economic forecasts yesterday, the European Commission said that the Irish economy – as measured by GDP – will grow by 4% this year before moderating to 3.4% in 2020.

The commission predicted that the Irish economy will continue to grow at a solid pace, but warned that the risk of overheating could increase in the near term.

Commenting on today’s CSO figures, Minister for Finance Paschal Donohoe said the “continued softness in the international environment” and Brexit showed the need for careful management of the economy.

Ibec chief economist Gerard Brady said the negative impact of mounting global trade tension, whilst not targeted at Ireland directly, will inevitably wash up on our shores.

“How long these tensions last, and their ongoing reverberations will have a big say in the future of open economies such as ours,” he added.

Economy set for solid growth but EU warns of overheating

Economy set for solid growth but EU warns of overheatingThe European Commission has predicted that the Irish economy will continue to grow at a solid pace but warned that the risk of overheating could increase in the near term.

In its quarterly economic forecasts, the Commission said that the Irish economy – as measured by GDP – will grow by 4% this year before moderating to 3.4% in 2020.

This compares to its previous forecast of growth of 3.8% for this year and 3.4% for 2020.

The Commission said that domestic activity is projected to continue growing at a solid pace with robust private consumption growth underpinned by strong growth in employment and wages.

It added that investment in construction is also forecast to expand at a brisk pace.

The Commission noted that the economy maintained its momentum in the first half of 2019, with employment soaring by 3.7% year-on-year and the unemployment rate falling to 5% – a level last seen in 2007.

Average weekly earnings also rose by 3.4%, supporting household disposable income, it added.

But it cautioned that the economic outlook remains clouded by uncertainty, particularly due to Brexit and changes in the international taxation environment.

It also said that the “difficult-to-predict activities of multinationals could drive headline growth in either direction”.

The Commission also warned that in the absence of major negative external shocks, the risk of overheating could increase in the near term.

“The tight labour market and diminishing spare capacity point to an economy possibly operating above its potential,” it said.

“The use of volatile and potentially short-lived foreign-company sourced corporation tax receipts to stimulate domestic demand would also fuel overheating,” the Commission added.

Meanwhile, the European Commission has today lowered its estimates for euro zone growth and inflation, saying uncertainty over US trade policy posed a major risk to the bloc.

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Ireland remains competitive, but threats to economic sustainability on the rise

Ireland remains competitive, but threats to economic sustainability on the rise

Ireland continues to perform well in the three most influential competitiveness indicators, according to the latest Competitiveness Scorecard published by the National Competitiveness Council.

The NCC said that Ireland is ranked 7th in the IMD rankings and ranked 23rd in both the WEF and World Bank rankings.

The NCC said that the economy made large competitiveness gains from 2010 onwards.

But it also pointed to the risks facing the country’s competitiveness, including Brexit and potential changes in US international trade policy.

It said these issues are compounded by domestic issues, including the concentration of the economy on a small number of firms, in a small number of sectors, which leaves it vulnerable to shocks.

The Council noted the risk of overheating – recently highlighted by the Irish Fiscal Advisory Council – but it added that this possibility could change rapidly in the face of an international downturn.

Today’s scorecard report also shows that Ireland also remains a high cost economy.

It said that higher costs, in general, are less of a concern, should productivity levels grow at a faster pace, but the majority of firms here are showing stagnant or declining growth in productivity.

Commenting on his last report as NCC Chairman, Professor Peter Clinch said that with the highest public debt levels in the EU, Ireland is vulnerable in the face of any future crisis.

Professor Clinch said that threats to the sustainability of the economy sit alongside other sustainability issues.

Ireland is on course to fail to meet its 2020 EU commitments for reductions in greenhouse gas emissions, which continue to rise despite decreasing across the EU, he said.

“The Council welcomes the Government’s Climate Action Plan and notes that significant behavioural change will be required for Ireland to come close to meeting its 2030 targets,” Professor Clinch added.

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Annual inflation moves up to 1.1% in June

Annual inflation moves up to 1.1% in June

New figures from the Central Statistics Office show that the annual inflation rate inched up to 1.1% in June from 1% the previous month on the back of higher rents, more expensive utility bills and higher air fares.

June marks the fourth month in a row that inflation was 1% or higher.

Before this consumer prices had been broadly flat for several years despite the fact that the country’s economy has been the fastest growing in Europe.

Today’s CSO figures show that prices for housing, water, electricity, gas and other fuels rose by 4% due to higher rents and mortgage repayments as well as bigger electricity and gas bills.

Prices for alcoholic drinks and tobacco rose by 3.3% while prices in restaurants and hotels increased by 3.1% due to higher prices for people eating and drinking out.

Education costs rose by 1.7% while transport costs were also higher on the back of an increase in air fares and higher prices for cars.

Meanwhile, the cost of communications fell by 6.6%, while clothing and footwear prices reduced by 1% due to sales.

June also saw lower car insurance premiums and cheaper prices for appliances, articles and products for personal care, the CSO added.

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Mortgage approvals rise by 10% in May year on year

Mortgage approvals rise by 10% in May year on year

Almost 5,000 mortgages to the value of over €1.1 billion were approved in May, the latest figures from Banking and Payments Federation Ireland show.

Over 51% of these were for first-time buyers while mover purchasers accounted for 26.3%.

Today’s figures show that the volume of approvals rose by almost 20% month-on-month and by 10% year-on-year.

Meanwhile, the value of mortgage approvals rose by 22.1% month-on-month and by 12.1% year-on-year.

The BPFI also said that re-mortgage/switching approvals rose on a year-on-year basis by 7.5% in volume and by 5.1% in value terms.

Felix O’Regan, Director of Public Affairs at the BPFI, said that mortgage approvals in May showed a significant increase in both volume and value compared to the previous month as well as the previous year.

“In line with the broad pattern over recent months this uplift in activity is very evident in the first-time buyer segment of the market, which continues to account for just over half of all mortgage approvals,” he said.

“All in all, these approval figures point to a good pipeline of mortgage drawdown activity,” he added.

Conall Mac Coille, chief economist with Davy, said the market was bouncing back after some weakness earlier in the year as fears around Brexit put people off going into the housing market.

“We’ve seen a rebound in residential transactions coming into the summer months. The other issue is that last year we saw a squeeze on people who could get an exemption above 3.5 times income. If we look at first time buyer average approval at the moment, at €238,000 it’s up 5% on last year”, Mr Mac Coille said.

“It looks like some of that squeeze that we saw in the market last year is going away. The banks don’t need to squeeze lending because of the changes in the rules 18 months ago. People are being approved for higher levels of mortgage debt and in time that will breed higher inflation,” the economist added.

He said suggestions that uncertainty around the future of the help to buy scheme was contributing to a slowdown in house building had yet to feed through to the figures.

“Completions in the first quarter were up. Commencements are up to about 23,000 in the 12 months to April. We’re not seeing any slowdown in the data on home building. We’re still at depressed levels and it’s picking up.”

In terms of the help to buy scheme, Conall Mac Coille said once such programmes are implemented, they’re hard to take away without resulting in politically difficult decisions.

“It would cause a bit of disruption and dislocation in the market. If a builder bought land expecting to achieve a particular price for the homes he’s going to sell, he would have to cut that back,” he stated.

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Irish pension funds diversify amid uncertain outlook

Irish pension funds diversify amid uncertain outlook

Pension funds here have lowered their exposure and diversified into property, infrastructure and hedge funds according to a new report from Mercer.

The survey of 876 institutional investors across 12 countries managing assets of around €1 trillion found average equity allocations for Irish defined benefit schemes have fallen and now stand at just 28% compared to 34% in 2018

The Mercer’s 2019 European Asset Allocation survey also found that bond allocations remain broadly at 50%, while allocations to alternative assets like property, infrastructure and hedge funds have continued to increase from 15% up to 22%.

“While 2019 has so far been marked by cautious optimism, investors need to remain vigilant in an ever-evolving macro-economic and political backdrop,” said Olivier Santamaria, Head of Investment Consulting, for Mercer (Ireland) Limited.

“In the past year, Irish pension funds have reduced their exposure to equities, diversifying into other asset classes including property, infrastructure and hedge funds.”

The heightened global awareness of the sustainability agenda also appears to have had an impact, with just over half of schemes now considering environmental, sustainable and governance (ESG) risks as part of their investment decision-making, up from 40% last year.

Regulatory pressure seems to be the main driving force behind this behaviour the survey found, with just 14% of respondents indicating decisions are being driven by the challenges posed by climate change.

“Mounting evidence of overextension of credit means investors should continue to position their portfolios to weather possible market volatility, in the face of political uncertainty and diminished liquidity as Central Banks reign in their market involvement,” Mr Santamaria said.

“We expect the increasing focus on sustainability to continue and anticipate ESG factors will become an integral part of investment strategy setting and risk management.”

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Crude oil prices fall 1% on fears for global economy

Crude oil prices fall 1% on fears for global economy

Brent oil ticked higher today, supported by tensions over Iran and the decision by OPEC and its allies to extend a supply cut deal until next year, while US benchmark crude prices fell on weak economic indicators.

Brent was up 53 cents at $63.83 per barrel this afternoon, while US West Texas Intermediate (WTI) slipped 18 cents to $57.16. The US market was closed yesterday for a holiday.

Both benchmarks were set for their biggest weekly falls in five weeks.

A trade war between the US and China has dampened prospects of global economic growth and oil demand, but talks between the two nations resume next week in a bid to resolve the deadlock.

“The truce between the US and China is not translating into anything in the real economy in the short term.

German industrial orders fell far more than expected in May, and the Economy Ministry said this sector of Europe’s largest economy was likely to remain weak in the coming months.

In the US, new orders for factory goods fell for a second month in May in a row, government data showed, stoking the economic concerns.

The U.S. Energy Information Administration reported this week a weekly decline of 1.1 million barrels in crude stocks, smaller than the 5 million barrel draw reported by the American Petroleum Institute and less than analyst expectations.

The Organization of the Petroleum Exporting Countries and other producers such as Russia, a grouping known as OPEC+, supported prices by extending their deal on supply cuts.

Tension in the Middle East also offered some support.

Iran, already embroiled in a row with the US, threatened today to capture a British ship after British forces seized an Iranian tanker in Gibraltar over accusations the ship was violating EU sanctions on Syria.

A Reuters survey found OPEC oil output sank to a new five-year low in June, as a rise in Saudi supply did not offset losses in Iran and Venezuela due to U.S. sanctions and other outages elsewhere in the group.

Oil production by Saudi Atabia, the world’s top crude exporter, was 9.782 million barrels per day (bpd) in June, an OPEC source said, slightly up from 9.67 million bpd in May.

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Bills going up for nearly 100,000 non-domestic Irish Water customers

Bills going up for nearly 100,000 non-domestic Irish Water customers

Almost 100,000 non-domestic customers of Irish Water are set to see their fresh water and waste water bills rise.

The move follows a decision by the Commission for the Regulation of Utilities (CRU) on new tariffs following a restructuring of the charging regime.

The increases have been criticised by organisations that support businesses here.

The CRU says the new charging structure will create a more equitable, simple, stable and transparent charging method of the 183,479 non-domestic customers here.

But according to figures the regulator has released, for many – but not all – such customers it will also bring considerably bigger bills.

85,088 or 46% of Irish Water non-domestic customers will see decreases to their bills.

They will move right away to the new charging plan.

A further 67,088, or nearly 37%, will also move to the new tarrrifs and see their bill increase by less than €250.

19,268 or almost 11% will pay between €250 and €750 more. They will also be eligible for a transition tariff over three years, the regulator says.

While the remaining 12,035 or nearly 7% will face bill increases of €750 or greater.

They will also be eligible for a transition tariff as well as a 10% cap on their annual bill increase.

“The CRU welcomes the introduction of national tariffs for non-domestic customers,” said Laura Brien, Director, Water and Compliance at the CRU.

“This is a significant step in the transformation of Irish Water into a single public utility. These cost reflective tariffs will play an important role in encouraging water conservation.”

According to the CRU, there is currently over 500 non-domestic tariff levels, as well as multiple categories, methodologies, applications, billing arrangements and billing cycles as a result of the old local authority water system.

The new non-domestic charges were decided after a consultation period and take effect on 1 May 2020, in order to give customers time to plan.

However, Dublin Chamber has criticised the increases, saying they will lead to businesses in the city paying significantly more for water.

This will heap further costs pressure on businesses in the Dublin region and hurt the region’s competitiveness, it warned.

“The Dublin region will be disproportionately affected by the new water tariff structure, potentially undermining the region’s economic competitiveness,” said Aebhric McGibney, Director of Policy and International Affairs with the organisation.

“Dublin Chamber consistently warned the CRU about the unfair impact that the proposed tariff changes would have on Dublin businesses. It is disappointing to see that this information has not been provided.”

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France issues first 10-year bond at negative interest rate

France issues first 10-year bond at negative interest rate

France issued its first-ever 10-year bond at a negative borrowing rate today, meaning investors pay, rather than receive, interest for the privilege of owning French sovereign debt, the state debt management agency AFT said.

AFT said that it issued €9.996 billion in long-term bonds, with just under half – or €4.972 billion – in the form of 10-year bonds at a rate of -0.13%.

The agency also issued €2.05 billion in 15-year debt with a coupon of +0.23% and €2.974 billion in 30-year debt at +0.8%.

It is the first time that France, the euro zone’s second-biggest economy, has issued sovereign debt at a negative rate with a number of other countries in the currency area – notably Austria, Germany and the Netherlands – already charging investors to buy their bonds.

Official rates in the euro zone as a whole have been negative since 2014 when the European Central Bank lowered its key deposit rate to -0.1%.

The ECB has since cut the deposit rate further, to -0.4%.

But with more easing looking likely after ECB chief Mario Draghi hinted as much last month, the so-called yields, or investors’ return, on Europe’s safest bonds are falling.

On the secondary markets, where already issued debt changes hands, the yield on 10-year French government bonds already drifted into negative territory in mid-June.

Outside the euro zone, EU members Sweden and Denmark also have negative interest rates, as does non-member Switzerland.

Financially weaker euro zone members Greece and Italy still have to pay more than 2% of interest to find buyers for their government bonds.

Analysts predict yields in Europe will keep falling as Draghi’s successor at the helm of the ECB, IMF chief Christine Lagarde, is expected to increase economic stimulus either through rate cuts or quantitative easing.

But the move to more deeply negative yields raises concerns that Europe may be following in the footsteps of Japan, which has been having trouble to revive inflation and growth.

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