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Tax windfall won’t boost spending – Paschal Donohoe

Bumper corporation tax receipts pushed the overall tax–take in November to €631m ahead of target.

Department of Finance show that taxation receipts for the month of November were €938m higher than in the same month last year, boosted by very strong corporation tax receipts.  November is the month when must businesses pay their tax, making it a key point for  budget arithmetic.

Minister Paschal Donohoe welcomed the numbers, and said the latest higher than expected corporation tax income will not be used to boost increased spending.

“These additional receipts are not being used to finance additional expenditure.  Instead, all of the excess will be set aside to reduce – and possibly eliminate – the headline deficit, putting Ireland in a stronger position and better able to meet the challenges that may lie ahead,” Minister Donohoe said.

Up to now, a surge in tax receipts has largely been eaten up by overspending at the Department of Health. Expenditure in November was marginally ahead of profile, the Department of Finance said.

“Some of the increase in corporate tax receipts this year is due to one-off factors, which was signaled at Budget time and will not be repeated.  For next year, my Department has taken account of this and has projected a decline in corporation tax receipts for 2019; expenditure plans have been set on this basis.  Having said that, I am conscious of the increasing concentration of overall taxation revenue on corporation tax receipts and I intend to bring to Government in the new year a set of proposals on how this can be addressed,” Minister Donohoe said.

The increase in the amount of corporation tax paid in Ireland this year is partly down to a rise in company profits – and in particular the profits booked in Ireland by some large multinationals. It is also due in part to one-off changes in global tax practice that mean around €700m of extra tax will be paid here this year, but its not expected to recur.

Article Source: http://tinyurl.com/kbwqb42

You’d be crazy not to tap into open-source software and communities

Last week in this diary I discussed our remote-working strategy. By adopting a company culture of remote and flexible work, we gain access to much larger pool of global talent. The trade-off is that you have to work harder to ensure team cohesion.

Making this work is not just about fancy tools like Slack, it’s also about setting up transparent information flows, and embedding routine-driven processes. Have strong routines allows you to give staff greater autonomy since they already know what to do next most of the time. Lower the need for continuous management intervention is a big productivity win.

These strategies are something that I have adapted from the open-source software community, as they have proven very effective in allowing large numbers of distributed people who barely know each other to work together.

The most important borrowing is the idea of transparency – that everyone’s work happens in the open, and anybody can review and verify it. Peer pressure is much stronger that management pressure.

By ‘open-source software’ I mean not only such famous examples as the Linux operating system that runs most of the world’s websites, but also large swathes of system infrastructure that goes unseen but is essential internet ‘plumbing’.

It’s a strange hobby, as most open source is coded in software developers’ spare time, but very valuable. The large US company RedHat (which bought one of the startups where I was CTO in the early days – RedHat now has a 60+ person office in Waterford) was recently acquired by IBM for $34bn. Yes, that’s thirty-four billion dollars. You can make a lot of money as a plumber.

A technology startup can leverage this world of open-source software and it’s hobbyists and communities. You’d be crazy not to. Think about it – those who choose to continue doing the same work as their day job when the get home after a long day are going to be some of the best people you can find. They care – a lot.

If you support this community, you will build up a reputation for being developer-friendly, and this will make recruiting much easier – and cheaper. The commission for hiring a single senior developer is pretty steep, normally a sizable fraction of first year salary. And if you get it right, you won’t have to go searching, your developers will recommend you to their friends. That’s a really big win, because great developers want to work with other great developers.

So how can a technology startup tap into this open-source world? By explicitly supporting it. Make sure your marketing materials and messaging acknowledges this world, the fact that it is probably the technology infrastructure that makes your business possible in the first place, and affords it the respect necessary.

You should think about sponsoring community events. Lots of great companies do this. You can provide meeting space to hold tech meetups. You can provide the beer and pizza. You can provide direct monetary sponsorship to the organisers.

When it comes to larger events, you can sponsor them directly, especially the community conferences. It’s not that expensive and does mark you out as a ‘good’ company. If you’re ambitious, hold your own community conference. We did this in my last company, and it was hugely successful (and very stressful – don’t just jump into this like we did – you’ll lose money).

You can sponsor individual projects directly. This is a really great thing to do. It enables the ‘maintainer’, the key person building the project, to work on it full time.

In terms of gaining community respect, this is a big one.

Ask your developers what code frameworks and libraries you are using, and help those projects. You’ll get your logo right in front of exactly the developers you’re trying to hire.

Finally, the big one, just like Redhat and IBM, you can hire and pay for developers to work on open source. These do not have to be full-time positions, although many large companies do support full-time open source developers on staff.

More realistically, for a later-stage startup, you can allow your developers to work on open-source projects.

You can allow them to work both on their own time, and during work hours. You’ll need to put in place policies to protect intellectual property, and clearly delineate boundaries, but the benefits are immense.

I’ve found, and continue to find, awesome developers, and can hire at competitive rates, simply because we make this possible.

In my last company we would often make fun of older competitors who were obsessed with owning every last line of code – “they’re me lucky charms!” You can’t build charming software without developers. A startup needs to hustle against larger competitors, and this is an easy win.

The question of intellectual property is not something you can dismiss easily. Your investors, rightfully, will expect you to protect the company’s assets.

It makes no sense to give away your code to competitors. But there is another approach you can take. Open source is most successful when it is ‘plumbing’. To build modern websites that can operate at scale, you need an awful lot of plumbing. This is one of the ways that Amazon Web Services makes money – by selling ready-made internet ‘pipes’. As part of your software development process, your developers will naturally build many small utilities, generic frameworks, and reusable components. None of these will be specific to your business, or even to your industry. For example, a component displays a calendar on a webpage could never be considered ‘secret sauce’. Use these materials to accelerate your recruiting efforts.

Get a senior developer to register a public profile for your organisation on github.com (the Facebook of developers), and publish some of your generic component as open source.

This is a signal to high-quality developers that you are a high-quality company that cares about developers.

You’ve shown that you’re sophisticated when it comes to intellectual property, you’ve shown that your developers can enhance their own professional status, and you’ve shown that you can contribute back to the community in meaningful way. And you’ve put some money into it.

Social signals don’t work unless they cause you some credible pain.

As a startup you might be wondering how you can afford all this activity. You can’t – at first. You have to build up to the point where you have the resources to support it. But you can do a great deal of it even in the early stages.

Setting up a github.com account and publishing utility code is free. Buying beer for a meetup is pretty cheap. Just saying that you support open source on the ‘Jobs’ page of your website is a big deal – most companies don’t. And just deciding to recognise and respect the open-source community? Common sense is free too.

(Newsletter update: 5,133 subscribers, open rate 16pc – the machine rolls on. Podcast update: 27 downloads last week with five episodes published. We’re about to start a proper social media campaign for this, so we’ll see how that works out.)

Article Source: http://tinyurl.com/kbwqb42

Should I accept pension transfer value?

Query: I left my former employer two years ago after working there for almost 20 years. I have an entitlement to a pension from that company’s defined benefit (DB) pension scheme. I have received a letter from my former employer, offering me an ‘enhanced transfer value’. Should I transfer my benefit entitlement out of that DB scheme. I have a defined contribution (DC) scheme with my current employer. What do I need to bear in mind when coming to a decision? John, Carrick-on-Shannon, Co Leitrim

Answer: There has been a big decline in the number of defined benefit (DB) pension schemes in recent years. For many schemes, a combination of increased longevity, low interest rates and changes in accounting rules have resulted in scheme liabilities outweighing assets – a funding deficit, and an increasing cost burden on sponsoring employers.

Many schemes are either closing to new entrants, closing to future benefit accruals or winding up altogether. An added problem for employers and trustees is that for many DB schemes, deferred members outnumber current active members. (Deferred members are former employees who still have a benefit entitlement in the scheme and have not yet retired.)

In an attempt to ease the administrative and financial headache associated with these scheme members, many trustees and employers have contacted former employees and reminded them of the option they have to transfer out to alternative pension arrangements. Sometimes a financial incentive to do so is offered.

There are a number of things to consider when deciding whether or not to transfer out of your DB scheme.

The first and most important factor to understand is that if you transfer out of the DB scheme of your previous employer, you will be transferring your DB benefit into a DC arrangement – either the DC scheme you have with your existing employer, or a buyout bond which you take out yourself. If transferring to a DC scheme, the investment risk in relation to the pension fund passes from your former employer to you personally.

On first impressions, a DB pension scheme is the best type of pension you can have – they’re often referred to as ‘Rolls-Royce’ pensions. A DB pension promises to pay you a pension based on a percentage of your final salary so planning for the future is easy. However, the ability of a DB scheme to pay you a pension based on your final salary depends on the scheme’s ability to fund its pension obligations for all members going forward. Benefits under DB schemes are not guaranteed. If a scheme’s assets are not sufficient to pay the benefits (liabilities) and the employer is not in a position to meet the shortfall, the pension promised to you may have to be reduced.

Therefore the current funding position of the scheme is an important consideration if you are offered a transfer value. If the scheme is not fully funded, this will be reflected in the transfer value provided to you.

That’s not to say that if a scheme is currently in deficit, it will remain so – or that an employer company will not be in a position to eliminate the deficit going forward. The opposite is also true. A currently fully funded scheme may not remain so. Consideration therefore needs to be given to the financial health of the scheme, and the future financial health of your former employer – in so far as this can be determined.

Some DB schemes offer enhanced transfer values – where you typically get a better transfer value than a shortfall in a DB scheme would typically allow for – to try to encourage existing members to leave the scheme.

If taking any transfer value to a DC arrangement, you would need to calculate the investment growth which you would need on that transfer value to provide you with the same – or a higher level of benefits – than the DB scheme was promising to pay. The required level of investment growth (which you would need to give you equal or higher benefits than the DB scheme) may well be accompanied by a level of investment risk which you are uncomfortable with. For this reason, many deferred members of DB schemes have in the past decided to remain in the scheme.

However, the financial pressures which many of the employers who provide DB schemes are under have made people reconsider.

Deciding on whether to take a transfer value from a DB pension scheme is an important decision and it cannot be reversed. It is important that all of the options available are reviewed and considered carefully.

If you stay in the DB scheme, the current financial health of the scheme may well improve or diminish over time.

Transferring out may well give you greater flexibility in terms of when and how to access your benefits, what the pension invests in, how much income to take in retirement (you would no longer be limited to a specific amount each year) and so on.

There are risks involved in staying in the DB scheme – or in taking the transfer value. However an enhanced transfer value does reduce the risks of taking a transfer value somewhat. Get independent financial advice before making your final decision.

Article Source: http://tinyurl.com/kbwqb42

Mortgage approvals jump by 11pc as values also increase

Mortgage approvals jumped in October, both in terms of volume and value.

Across all types of borrowers, banks approved a total of 4,262 mortgages in October, up 11.4pc month-on-month.

This is a 13.6pc increase in approvals year-on-year, figures from the Banking and Payments Federation Ireland show.

First-time buyers accounted for the lion’s share of activity, with 2,014 mortgage approvals.

The figures also show the value of mortgage approvals rose by 11.4pc year-on-year, and 13pc when compared with the previous month.

Mortgages approved in October 2018 were valued at €929m, of which first-time buyers accounted for €446m.

Meanwhile, the level of re-mortgaging or switching approvals rose on a year-on-year basis by 71pc both in volume and value terms – albeit off a low base.

Commenting on the figures, Felix O’Regan, director of public affairs at the Banking and Payments Federation, said: “All segments of the mortgage market contributed to an overall increase in annualised approval volumes and values in the 12 months to end-October 2018.”

Last month, following a review, the Central Bank said the rules dictating the amount of money people can borrow for a home and the size of deposits needed are to remain unchanged.

Introduced in 2015, the rules are in place to stop banks over-lending and consumers from over-borrowing.

The rules have been credited with slowing down the pace of house price growth.

Article Source: http://tinyurl.com/kbwqb42

‘If you’re going to leave, leave, but don’t do this halfway house’ – Tony Blair on second Brexit referendum

Former UK prime minister Tony Blair said any second Brexit referendum should be a choice between remain and a hard Brexit.

Speaking on ITV’s Good Morning Britain on Monday, the former Labour leader said a second people’s vote was the only way to settle the deadlock in Parliament.

Mr Blair, who is in favour of a second vote, said the choice should be between a hard Brexit or staying in the European Union.

He said Prime Minister Theresa May’s deal did not please Brexiteers or Remainers.

He added: “The only way to resolve this is to have the option remain or leave, but leave on terms that make it clear this is hard Brexit.

“I honestly think if you’re going to leave, leave, but don’t do this halfway house.”

Meanwhile, it has been reported that Theresa May’s chief Brexit adviser secretly warned her that the Northern Ireland “backstop” agreed in her deal with Brussels was a “bad outcome” for Britain.

In a letter to the UK Prime Minister, Oliver Robbins said the backstop, intended to prevent the return of a hard border with the Republic, would mean the imposition of regulatory checks between the North and the rest of the UK, according to The Daily Telegraph.

The disclosure will add to the pressure on the Prime Minister at the start of another difficult week as she battles to save her Brexit deal ahead of the crucial Commons vote on December 11.

The paper, which said it had been passed details of the letter by a “concerned minister”, said Mr Robbins had advised there was no legal “guarantee” Britain would be able to exit the backstop, potentially leaving the UK tied to EU customs arrangements.

He was said to have written: “We should not forget that the backstop world, even with a UK-EU customs union, is a bad outcome with regulatory controls needed somewhere between GB and NI, serious and visible frictions and process between GB and the EU, and no security co-operation provided for.”

The leak is likely to intensify demands for the Government to release the full legal advice on the Withdrawal Agreement if it is to avoid a major constitutional battle with Parliament.

Article Source: http://tinyurl.com/kbwqb42

Hundreds of regional jobs to be created as €30m allocated to ‘food hubs’

A selection of ‘food zones’ are the big winners from the allocation of €30m in new funding for regional employers.

Business Minister Heather Humphreys will today reveal the recipients of the Regional Enterprise Development Fund.

It provides money to enterprises involved in food, pharma, design, marine, engineering, bio economy and disruptive technologies.

Among those getting funding today is the successful Ludgate Hub, which is to be awarded almost €2m as part of a project to create 500 direct jobs and 1,000 indirect jobs in West Cork by 2020.

A project in Leitrim will receive funding to develop a new 9000sq ft Food Enterprise Zone, with the creation of 50 jobs. The existing Food Hub in Drumshanbo is full and has a waiting list. It is already home to The Shed Distillery, where GunPowder Gin is produced.

Unlike other schemes, the funding is allocated on a regional basis as opposed to a county basis.

The focus is on projects that will have a “big impact on enterprise development and sustainable job creation”.

Article Source: http://tinyurl.com/kbwqb42

Italian stocks lead Europe in recovery driven by banks, technology

European shares climbed modestly at the end of a volatile week, with banks and technology stocks, which have been hit hard by growth worries, leading the way, while Italian stocks rallied as bond yields fell.

The pan-European STOXX 600 managed a 0.2pc gain by 0830 GMT, while Italy’s FTSE MIB outperformed with a 0.8pc rise.

Italian banks climbed after a press report that Italy’s EU Affairs Minister Paolo Savona is considering resigning over the government’s decision to challenge European Union budget rules. Savona denied the report.

The banks index climbed 2pc as bond yields slid, boosting lenders who have large sovereign bond portfolios.

Banco BPM shares rose 3.1pc, while Mediobanca, Unicredit, UBI Banca, and Intesa Sanpaolo gained 1.3 to 1.8pc.

Renault shares climbed 3.2pc in a modest recovery after the carmaker dropped 8.4pc on Monday when CEO Carlos Ghosn was arrested over allegations of financial misconduct.

Ericsson shares rose 2.1pc and Nokia climbed 1.3pc as traders saw a positive read-across from a Wall Street Journal report that the US government is asking allies to shun telecoms equipment from China’s Huawei.

Earnings disappointments drove the biggest losses on the STOXX.

Shares in stone wool insulation maker Rockwool dropped 8.4pc after its third-quarter results.

German industrial machinery group GEA fell 8.6pc after it cut its outlook for 2018 cashflow margin.

M&A was a driver in the small-cap space where UK-listed regional airline Flybe surged 19pc after Sky News reported Virgin Atlantic is in talks to acquire it.
Article Source: http://tinyurl.com/kbwqb42

DAA bid to raise cap on airport fliers to 35 million

THE DAA has entered preliminary discussions with An Bord Pleanála about raising the cap on the number of passengers that Dublin Airport can handle, from 32 million to 35 million.

The construction of Terminal 2, which opened a decade ago, was subject to a planning condition that included the current maximum number of passengers that could use the airport.

But Dublin Airport is on track to handle more than 30 million passengers this year.

Even a 5pc rise in passenger numbers during 2019 would see it approach the current cap.

The DAA wrote to An Bord Pleanála earlier this year to initiate a pre-consultation process, which has now begun.

A DAA spokesman said the 32 million passenger condition was imposed largely due to surface transport limitations.

But he said that since the planning application for T2 was lodged in 2006, the number of passengers using public transport to access the airport has increased from 26pc to 37pc, while the percentage of people using cars has fallen from 44pc to 31pc.

The semi-State body probably hasn’t immediately sought to increase the cap beyond 35 million passengers a year. That’s because it is engaged in a consultation process about expansion plans, which are likely to give it a clearer indication at a later stage about its likely future growth pattern.

Passenger numbers have surged in recent years, as an improving economy, route expansion and a growing level of transfer traffic have boosted activity.

The airport handled 29.6 million passengers last year, which includes 1.8 million transit passengers who used it as a hub.

New services this year will have helped to lift the total figure to more than 30 million.

This year, the airport has benefited from new services to cities including Hong Kong, Beijing and Seattle. Next year, new destinations – including Dallas and Minneapolis-St Paul – will be added.

In tandem with seeking to increase the existing passenger cap, the DAA is also contemplating additional car parking facilities to accommodate the increase in numbers.

Recently, property developer Gerry Gannon sought permission to make a 41-acre site near Dublin Airport a permanent car park.

The site, which accommodates over 6,200 cars, has been operating on a temporary basis since it first opened nearly 20 years ago.

It is leased to QuickPark, the company controlled by John O’Sullivan, the founder and former owner of AirCoach.

Planners for Mr Gannon noted that QuickPark is one of three authorised long-term car parks serving Dublin Airport.

The DAA operates about 19,180 long-term car parking spaces at two such facilities.

Article Source: http://tinyurl.com/kbwqb42

Banks have become more profitable since the crash

BANKS in this country have become more profitable since the financial crash.

At the same time, other EU banks have seen their level of profits decline, a new paper from an economist based in the Central Bank has found.

Banks here are gaining from the low cost of funds, and from the fact they have very little competition for savings, and so pay some of the lowest rates in the EU.

Low levels of banking competition mean banks here do not have to compete for deposits, unlike banks elsewhere.

Separate studies have found that deposit rates paid by banks in this country are among the lowest in Europe.

Mortgage rates are so high the Central Bank has repeatedly found that home buyers are paying multiples of what is being charged in other countries in the eurozone.

Earlier this month, European Central Bank president Mario Draghi, speaking in Dublin, blamed a “quasi-monopoly” among banks here for the high mortgage rates.

AIB and Bank of Ireland dominate the mortgage market, accounting for 60pc of lending. AIB made profits of €762m in the first half of this year, with Bank of Ireland making €500m over the same period.

Central Bank economist Ciarán Nevin has found that banks here are highly profitable due to what he calls “historically low levels of competition” since the crash.

He looked at what is called net interest margins, a key measure of bank profitability. It is the difference between the interest income generated by banks on the likes of mortgages and the amount of interest paid on deposits.

Mr Nevin found: “In the post-crisis years, the net interest margins (NIM) of Irish banks has increased significantly, while the NIM for the sample of other EU banks declined.”

This may be because of greater competition for deposits in the rest of the euro area, pushing deposit rates up.

He said historically low levels of competition meant Irish banks here were in a position to capitalise on low funding costs and increase their margins substantially.

However, these benefits appear to be diminishing in recent years. The study looks at the period between 2003 and this year.

Banks may make even higher profits if European interest rates rise, as this would increase the return on loans.

The highly profitable nature of Irish banking may attract new entrants. This would likely lead to greater competition in the market, which may benefit consumers through reduced costs and increased choice, Mr Nevin said.

Article Source: http://tinyurl.com/kbwqb42

What do I do if my bank says projections for firm are not based in reality?

Q: I am at an advanced stage of business planning for a new food product and all the indicators are that it will be successful. My projections show I will be doing several million in turnover in the third year, however my bank has been highly critical saying my projections are over-ambitious and not based on reality. What should I do?

A: I don’t know enough specifically about your business but the problem that your bank is identifying is a common one. Sometimes the entrepreneur can get so close to the business idea that they end up overestimating the revenue. In most cases, they are correct in the figure that they project, however they can be years ahead of the actual time when this revenue will be achieved.

This sounds like the case with your projection. I am sure you have done extensive research that is backed with quite a lot of logic. However, if you are suggesting the business will be turning over several million after year three, unless you have discovered something totally unique and will have a brilliant route to market and marketing strategy, then I would tend to agree with the bank.

Think of any successful brand that has enjoyed recent growth and if you have access to any published figures from them, you will find growth is far more gradual than you anticipate. Building the correct supply chain alone could take a year or more, and creating awareness in the market place could take up to five years to get to a high enough level.

I praise you for developing what sounds like a fantastic project, but would urge you to revisit the pace of growth to cover a longer period. It might be an idea to talk with your Local Enterprise Office or Enterprise Ireland and secure the services of a mentor who would be familiar with sales patterns in this area.

Q: I have been running a drapery shop set up by my grandfather in the early part of the century. As much as I have tried new ideas, the sales in our small town are no longer viable and I am not taking a salary. Are there any credible options left open to me?

A: Emails like yours are ones I get all too often, and they cause me to worry about what advice to give. On one hand, I should be saying to you to have one last try and use all of the new marketing tools available to you, like digital media, fashion shows and other fun events to attract customers and generate lots of free PR. However, judging from the tone of your email, you have tried this already and what you may be dealing with is the reality of a diminishing population in a rural area, and the perceived attractiveness of nearby larger towns.

On the other hand, I should be saying to you that it is probably time to close the business and see if you can utilise the property’s asset to either sell or convert into a revenue stream by using it for accommodation or other commercial purposes.

That has worked for many in a similar position.

There is another emerging option. In the UK, hundreds of towns and villages were left with no shop at all. Through a series of innovative projects, they now have quite a long list of community-operated shops, staffed with volunteers with perhaps a paid manager. These community shops tend to be in some of the more main street categories and it’s unlikely drapery alone would work.

Obviously interest would be more as a support for your town, than a profitable commercial venture. It is worth exploring and there is endless reading on UK research. It might give you an in-between option that you have not considered so far, provided it meets your own requirements with regard to an income stream from other sources, etc.

Article Source: http://tinyurl.com/kbwqb42