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Small firms need UK-style tax breaks to ‘fight back’, compete post-Brexit – Dublin Chamber

Small firms need UK-style tax breaks to ‘fight back’, compete post-Brexit – Dublin Chamber

BUDGET 2020 must help small, indigenous companies to compete with a “more attractive” UK, chambers of commerce leaders told an Oireachtas committee yesterday.

Dublin Chamber chief executive Mary Rose Burke, whose organisation represents more than 1,300 businesses, said capital gains tax rules punished risk-taking by startups. She told the Budgetary Oversight Committee that the current blanket 33pc rate should be reduced to 20pc “for all unlisted trading firms”, noting that the UK already had a similar policy.

“We need to foster an entrepreneurial environment and strengthen Ireland’s indigenous business base,” she said, referring to the State’s headline corporate tax rate used to woo multinational investment.

Ms Burke said Ireland’s 33pc tax on capital gains “applies irrespective of the level of risk taken by an entrepreneur and the contribution of the investment to the Irish economy”. She added: “The same tax is paid on passive investments in large blue-chip multinationals as is paid on high-risk Irish startups. This effectively incentivises investment in larger foreign firms over investment in Irish small and medium-sized enterprises (SMEs).”

Dublin Chamber said the UK tax policy was well ahead of Ireland’s in helping startups and SMEs – and could gain further competitive advantages post-Brexit.

“They’re already more attractive than us for entrepreneurs. So whether they stay or leave (the EU), we need to look to improve our competitiveness in ways that are under our control,” Ms Burke said.

“Irish entrepreneurs have had to look on enviously over the past decade as the UK has rolled out the red carpet for burgeoning business, with consistent tweaks and improvements to their tax regime. Ireland has been too slow to react, resulting in our nearest neighbour – and biggest competitor – being allowed to steal a march,” she said. “With Brexit on the horizon, it is vital that we react and fight back.”

Her Dublin Chamber board colleague, KPMG tax partner Eoghan Quigley, said he was confident that capital gains incentives for small businesses would boost employment and retail sales, and “yield more tax than they cost us”.

Mr Quigley said the UK would gain policy freedom post-Brexit to offer even more competitive tax incentives.

“They will be free of a lot of the state aid restrictions that we have here,” he said, arguing for Irish tax policy on small businesses to “mark” UK standards closely.

Chambers Ireland, the umbrella group for chambers of commerce across Ireland, told the committee that Brexit would not only harm the agri-food and tourism industries, but was likely “to have a broader impact, potentially depressing consumer spending in regional areas significantly”.

Chambers Ireland CEO Ian Talbot called for the Government to provide detailed long-term plans on the rollout of carbon taxes and green energy incentives.

“We believe there should be a schedule for such increases, which will have the double effect of not only helping business to plan for them, but will also bring greater predictability to the present value of energy efficiency measures, thereby encouraging viable investment,” Mr Talbot said.

Finance Minister Paschal Donohoe is due to present Budget 2020 on October 8.

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Pound tumbles 1% as investors fear ‘never-ending limbo’ in UK politics

Pound tumbles 1% as investors fear ‘never-ending limbo’ in UK politics

The pound fell 1% today against the dollar, ceding gains made the previous day after the Supreme Court’s ruling against Prime Minister Boris Johnson.

Investors are pricing in many more months of Brexit and general election risk.

Boris Johnson was dealt a blow by the court, which ruled yesterday that he had unlawfully suspended parliament, sending the pound half a percent higher.

While the ruling reinforced belief that Britain was unlikely to leave the European Union without a deal by October 31, other risks remain, include a split parliament and an election.

“Yesterday there was some misplaced optimism that Johnson would be removed and no-deal would be further away. But what we see today is that the status quo in terms of Brexit has not altered at all,” Rabobank strategist Jane Foley said.

“But we still have Johnson in place, the opposition still doesn’t want a general election and we are still cornered with respect to Brexit, it’s taken a day for that to sink in,” she added.

Sterling’s weakness was in part also down to a firmer dollar, which has been lifted by aggressive trade war rhetoric from President Donald Trump.

Against the greenback, the pound fell to $1.2380, while it weakened 0.6% against the euro to 88.41 pence.

The pound had strengthened to $1.2504 at one stage yesterday, not far from a two and a half month high of $1.2582.

Boris Johnson now faces a hostile parliament that has returned to sitting, and his opponents are seeking new ways to block him from pursuing a no-deal Brexit that they fear would cause huge economic disruption.

He has repeated he can strike an exit deal at an October 17-18 EU summit, but EU negotiators say he has made no new proposals that can break the deadlock over how to manage the Northern Ireland border after Brexit.

The UK parliament has already passed a law requiring him to request a Brexit deadline extension to January 31, should a deal not be reached.

“No-deal risk is still on the table, it’s just more pronounced for January now than for October,” Foley said.

Meanwhile opposition leader Jeremy Corbyn said that once a no-deal Brexit had been averted, it would be appropriate to move a no-confidence motion and then hold a national election.

“The main risk now is that we are in a never-ending limbo,” said Kit Juckes, an FX strategist at Societe Generale in London.

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Dublin city councillors vote to cut property tax by 15%

Dublin city councillors vote to cut property tax by 15%

Dublin city councillors have again voted to reduce the annual local property tax by 15% – the maximum amount allowable.

The elected councillors refused to accept the advice of management who pointed out this will mean €12m less for public services at a time when the council is facing increasing costs.

The vote will mean that a homeowner in a house valued in 2013 at between €200,000 and €250,000 will pay €60.75 less a year.

Fianna Fáil, Fine Gael, Sinn Féin, People Before Profit and members of the Independent group voted for the reduction while Labour, Social Democrats and Greens voted to keep it at its basis rate.

The cut was approved by 34 in favour, 19 against and one abstention.

A council report from Chief Executive, Owen Keegan, stated that the council is facing increased costs for capital projects and restoration of void housing units because of funding changes by the Department of Housing, Planning and Local Government.

A new system of valuation for Irish Water rates could mean the loss of €8.9m; national pay awards will cost another €10.42m; there are €46m in outstanding insurance claims; the HSE is reportedly underpaying for ambulance services by €4m a year; and there are increased management costs for social housing units.

Leader of the Fianna Fáil group, Cllr Deirdre Heney, said it was an unfair tax as Dublin people have to pay more than those elsewhere just for where they live.

Cllr Paddy McCartan of Fine Gael said that with equalisation, 20% goes to subsidise other less well-of councils while 16,000 households in Dublin city who live in homes built since 2013 do not pay anything because there has not been any new valuation.

Cllr Seamus McGrattan of Sinn Féin said his party had always opposed the tax which he said is a tax on the family home.

However Cllr Michael Pidgeon of the Greens said the reduction would mean nothing to someone who is homeless and a pittance to those in an average home while financier Dermot Desmond would get a reduction of €5,100 and at the same time the city has less money for services.

Dermot Lacey of Labour said the choice was between public services and populism and Labour was voting for public services.

A survey carried out by council management found that 78% of members of the public were in favour of the reduction.

However the report stated that with a response rate of 0.005%, this may not be representative.

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Sterling rallies, stocks slip on Supreme Court ruling

Sterling rallies, stocks slip on Supreme Court ruling

Sterling extended gains on Tuesday while euro zone stocks tumbled after Britain’s Supreme Court ruled that British prime minister Boris Johnson had acted unlawfully when he advised Queen Elizabeth to suspend Parliament this month.

The British currency gained as much as 0.4 per cent against the euro to 88.07 pence and up nearly 0.5 per cent versus the dollar to $1.2491. Stocks tumbled however on the back of the stronger pound.

British gilt yields rose following the decision, dragging safe-haven German bond yields higher.

British government bond futures fell to a session low of 133.12, down 60 ticks on the day, while 10-year gilt yields rose 3 basis points on the day to 0.585 per cent.

“While the decision of the UK’s highest court is a big political win for oppositions parties, markets are taking the view it is unlikely to lead to any major Brexit developments before the next big milestone in six days’ time when the EU want to receive the UK’s written proposal for a backstop replacement and beyond that, the EU summit on 17 & 18th October and the law requiring an extension be requested on 19th October,” said Gearoid Keegan, Investec Treasury

London’s blue-chip FTSE 100 hit its day low as sterling rallied after the ruling. A JPMorgan’s index tracking UK stocks that make their revenue at home hit their day highs on the news. – Reuters

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Euro zone business growth halts as Germany goes into reverse

Euro zone business growth halts as Germany goes into reverse

Euro zone business growth stalled this month, dragged down by shrinking activity in powerhouse Germany, where a manufacturing recession deepened unexpectedly.

Today’s downbeat survey results come less than two weeks after the European Central Bank pledged indefinite stimulus to revive the 19-country currency bloc’s ailing economy.

IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good guide to economic health, suggested support for stuttering activity is needed.

It sank to 50.4 in September from 51.9 in August and was below all forecasts in a Reuters poll that had predicted a reading of 51.9.

That was just above the 50 mark separating growth from contraction and was its lowest since mid-2013.

The euro zone economy expanded 0.2% in the second quarter, official data showed last month, and the average PMI for this quarter suggests growth could now be weaker.

Analysts said that with the euro zone’s manufacturing sector in the doldrums and services activity starting to lose pace, there is little reason to think that GDP growth will pick up as the ECB and the consensus forecasts assume.

The ECB trimmed its deposit rate further into negative territory on September 12 and promised bond purchases with no end-date to push borrowing costs even lower.

These marked the bank’s last big policy moves under outgoing chief Mario Draghi, who leaves next month.

Earlier figures from Germany, Europe’s largest economy, showed private sector activity shrank for the first time in six and a half years as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum.

While there are no signs of a turnaround yet, the German Economy Ministry said earlier this month that the country was not facing a bigger downturn or a pronounced recession after contracting slightly in the second quarter.

But several institutes have said the economy would slide into recession this quarter.

In France, the bloc’s second-biggest economy and the only other member for which flash numbers are published, growth slowed unexpectedly.

A flash services PMI for the bloc fell to 52 from 53.5, below all forecasts in a Reuters poll, while a manufacturing index fell to 45.6 from 47, a low not seen since October 2012.

The Reuters poll had predicted 53.3 for services and 47.3 for manufacturing.

Indicating there will not be much improvement soon, a services new business index dropped to 50.9 from 52.3 and a manufacturing new orders index fell to 43.1 from 45.9, a more than seven-year low.

But overall optimism picked up a touch from August’s six-year low. The future output index nudged up to 55.7 from 55.4.

After easing policy this month some economists think the ECB will be forced to go further and Monday’s weak readings will do nothing to dissuade them.

Analysts said the weak data support expectations that the ECB will have to ease monetary policy again in December.

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Central Bank warns on Brexit and corporation tax ‘shock’

Central Bank warns on Brexit and corporation tax ‘shock’

The Central Bank has warned that a disorderly Brexit and a reduction in the amount of corporation tax collected by the Exchequer could deliver a negative shock to the public finances.

In an Economic Letter published today, the Central Bank has forecast that the national debt could rise by €22 billion over the next five years.

It warns that if a disorderly Brexit and a fall in corporation tax were to happen together, the impact would be worse.

Ireland’s national debt is the equivalent of around €42,000 for every man, woman and child in the State – the highest per capita debt in the eurozone.

In its Economic Letter today, the Central Bank has pointed out that much of the improvement in managing the national debt over recent years has been due to high growth rates and low interest rates, rather than improvements in the public finances.

If a hard Brexit hits, the Central Bank warned that the national debt could rise by €22 billion over the next five years.

And this does not take into consideration any possible increase in interest rates.

On corporation tax, the Central Bank said it had taken a “conservative” estimate that it could be reduced by €3 billion a year due to changes in tax rules and a slowdown in the world economy.

This would have a similar effect in scale as a hard Brexit and the overall impact would be worse if both were to happen.

The Central Bank also repeated calls for the Government to use any windfall tax receipts this year to reduce the national debt.

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Some jobs and businesses may not be saved in event of no-deal Brexit – Taoiseach

Some jobs and businesses may not be saved in event of no-deal Brexit – Taoiseach

The Taoiseach has warned that some jobs and some businesses may not be saved in the event of a no-deal Brexit at the end of next month.

Leo Varadkar also told the Dáil that there “hasn’t been an enormous take-up by businesses” of a number of schemes set up by the Government to help mitigate the impact of Brexit.

He was answering Dáil questions from Labour Party leader Brendan Howlin, who said the time had come for the Government to “give clarity on the specifics of Brexit preparations”.

Mr Howlin asked how much funding would be made available to sustain jobs in the short and medium term, and how much money would be made available from the European Union in the event of a no-deal Brexit in six weeks’ time.

“The British government was forced, as you know, to publish its Yellowhammer report on the possible effects of Brexit,” he said.

“Do you think, Taoiseach, it is now time for your Government to publish its own detailed clear analysis on the impact for every sector of our economy of a hard Brexit?”

Mr Varadkar responded that Budget 2020 was yet to be agreed and that the details would be announced in three weeks’ time. But he said the “prudent thing to do is to prepare the Budget with a pessimistic scenario”.

He said there would be a “substantial package” in the Budget to support businesses that are vulnerable, and that while most will come from the Government’s own funds, some will come from the EU.

“I need to be honest with people as well,” Mr Varadkar said. “If we end up in a no-deal scenario it will be damage limitation and there may be some jobs that can’t be saved and some businesses that regrettably can’t be saved.

“But we will put together a package that will be significant, that will be meaningful and will allow us to save those jobs and business that are viable in the long term and that have been made vulnerable as a consequence of Brexit.”

The Taoiseach also told the Dáil that the Government does not have any document similar to the British government’s Yellowhammer.

However, he added that it had produced “all that information already” in the Brexit contingency plan document published in July, and in the summer economic statement.

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‘Palpable’ risk of no-deal Brexit remains – Juncker

‘Palpable’ risk of no-deal Brexit remains – Juncker

European Commission President Jean-Claude Juncker said there was a “palpable” risk of a no-deal Brexit and progress on replacing the backstop could not be made to reach a deal until the UK submitted written proposals.

Speaking at the European Parliament, he said “the risk of a no-deal remains real” but that would be the choice of the UK government.

“I said to Prime Minister [Boris] Johnson that I have no emotional attachment to the safety net, to the backstop, but I stated that I stand by the objectives that it is designed to achieve,” he said.

“That is why I called on the Prime Minister to come forward with operational proposals, in writing, for practical steps which would allow us to achieve those objectives.

“Until such time as those proposals have been presented I will not be able to tell you, looking you straight in the eye, that any real progress has been achieved.”

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UK car imports spend races 181% higher in summer months – Fexco

UK car imports spend races 181% higher in summer months – Fexco

New figures show that Irish motorists increased their spending on cars imported from the UK by 181% in July and August compared to the same two months in 2018.

The figures show that the country’s car import boom is picking up speed as the deadline to Brexit looms ever nearer, Fexco International Payments said.

The analysis of 1,500 purchases made through Fexco International Payments also found the number of UK vehicles imported by Irish drivers in July and August was up by 175% year-on-year.

Fexco said the the figures are even more breathtaking when compared to those recorded in July and August of 2016, the months following the Brexit referendum in the UK.

Since then, Irish consumers’ spend on cars imported from the UK has jumped by a huge 451%, while the number of import transactions has raced 291% higher.

Fexco said its data suggests the import boom is being driven mostly by individual motorists rather than car dealers.

Car dealers increased their spending on UK imports by a more modest 61% between 2016 and 2019, a fraction of the 451% surge in import spending made by drivers themselves.

The Kerry-based company’s records also suggest Irish drivers are capitalising on the euro’s strength to treat themselves to a higher-spec car from the UK.

The average amount spent per car in July and August was €16,197, an increase of 32% on the amount of money spent three years ago.

Fexco also said that imports may have been given extra impetus by buyers looking to do a deal before any change in tax and tariffs that might follow a hard Brexit on October 31.

David Lamb, head of dealing at Fexco International Payments, said that the final countdown to Brexit – and the rising possibility of a no deal – have “turbocharged” the popularity of used car imports among Irish motorists.

“The combination of the euro’s current strength against the pound, and the nagging fear that a no-deal Brexit could lead to the imposition of trade barriers between the UK and Ireland, have created a sweet spot that’s prompting many Irish drivers to secure a good import deal while they can,” Mr Lamb said.

“While a chaotic no deal Brexit at the end of October could undermine sterling even further, many tactical car-buyers are concluding that the already favourable exchange rate and tariff-free trade together make a compelling import opportunity,” he added.

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House rebuild costs rise by 6%, SCSI survey shows

House rebuild costs rise by 6%, SCSI survey shows

National average re-build costs have increased by an average of 6% over the past year, the latest Guide to House Rebuilding Costs from the Society of Chartered Surveyors Ireland reveals.

The Guide to House Rebuilding Costs is used by homeowners to calculate the rebuilding costs of their home for insurance purposes.

The SCSI stressed that homeowners should understand the difference between a valuation and rebuilding costs.

A market valuation is the expected amount you could get for your property if it was placed on the open market, but the rebuilding costs are associated with the cost of building or replacing the dwelling.

The SCSI says these figures can be very different.

Today’s guide shows that rebuild costs are up by 8% in Limerick, Cork and Galway over the last 12 months, while the rise in Dublin was a more moderate 5%.

The society said it believes this is linked to increased competition in Dublin, while it also reflects what is happening in the wider property market with prices falling in Dublin and still rising in the regions.

While price increases may have moderated in Dublin, it still has the highest rebuild costs.

The cost of rebuilding a three-bed semi in Dublin, is €208,000, while the cost of rebuilding a similar house in the North West of the country is €130,000.

Micheál Mahon, Vice President of the SCSI, said the cost of rebuilding rose because of the increase in labour rates due to the shortage of construction workers, the impact of new building regulations and the costs associated with disposing of demolition waste.

“The construction sector is experiencing high levels of activity and this increase is having an inflationary effect on construction prices. There are simply not enough construction workers to meet demand and as a result wage costs are rising,” Mr Mahon stated.

“More recently, changes to ventilation requirements for new builds came into effect this year and while they will help reduce heating costs in the long run, this has contributed to the rise in building costs. Thirdly, the costs of disposing of building waste have continued to rise,” he added.

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