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Archive for September 24th, 2012

You might recall when this Government entered office in March 2011, there was a “Gallic spat” between Enda Kenny and French president, Nicolas Sarkozy, and after “grandstanding” and demanding a reduction in the interest rate on Ireland’s bailout, An Taoiseach left an EU summit meeting with a flea in his ear after he refused to entertain a French request to discuss Ireland’s headline corporate tax rate of 12.5%. At that same summit in March 2011, Greece did get an interest rate reduction of over 1% on its bailout. Five months later, Ireland like Greece and new-bailout country, Portugal did finally get a reduction on the bailout interest rate. Yes, we’d lost a few tens of million of euro in interest from March to July – the interest rate was to apply retrospectively to loan tranches received but only from July 2011, the interest rate that pertained from Jan-Jul 2011 was the old higher rate – but at least we were placed on an equal footing with Greece and Portugal. Portugal however was gifted the interest rate reduction with no strings attached – Ireland had to agree to “participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive (CCCTB) and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework” as a quid pro quo for its interest rate reduction.

After the summit there was legacy concern that Ireland’s cherished corporate tax rate which has helped being a country, which had bypassed the industrial revolution under British dominion which had no interest in developing a potential competitor, into the information age. Yes, Microsoft, Google, Intel and the rest are here because of the educated, English-speaking, young and flexible workforce and okay infrastructure but the 12.5% corporate tax rate swings it. And yet, 14 months ago, we introduced uncertainty on our tax brand as a quid pro quo for getting an interest rate reduction which was gifted to Portugal.

Fast forward to June 2012 and the EU has yet another summit where it issues a communiqué which includes the statement

“The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally”

So if similar cases are to be treated equally, you would have expected Ireland to seek to void the commitment given in July 2011 to enter into tax discussions. After all, it was a term inserted for a reason and has only created doubt over our corporate tax arrangement which is unhelpful when we are trying to attract long term investment. Unlike the debt deal which is still being thrashed out if your believe certain ministers, voiding the tax commitment would presumably have been a simple matter and could have been done by the mandarins over the summer break? You’d think. But according to Minister Noonan last week, there was no conditionality placed on Ireland in 2011 when the interest rate reduction was accompanied by the statement that Ireland – not Portugal or Greece – would agree to engage constructively in discussions on our tax arrangements.

Last week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance Michael Noonan about what we had done to void the commitment extorted from us last year as a condition of getting the interest rate reduction. “What commitment?” was the Minister’s response. It’s as if there was no basis whatsoever for the “Gallic spat”

Deputy Pearse Doherty: To ask the Minister for Finance further to the EU summit statement on 29 June, 2012 which states similar cases will be treated equally, if he will set out the efforts that he has made to reverse the condition imposed on the State in July 2011, when a cut in interest rates on programme funding was made conditional on the State agreeing to participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive, CCCTB and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework in view of the fact that the cut in interest rates in July 2011 on Portugal’s programme funding was not conditional on any such potential concessions on tax arrangements.

Minister for Finance, Michael Noonan: As a committed member of the European Union Ireland always participates constructively in discussions at EU level as that is the only way to ensure that issues of concern to the State can be considered. Any attempt to reverse our approach now would be counterproductive, especially in view of the critical role to be played by Ireland during our upcoming Presidency.

The Euro Plus Pact comes under the aegis of the Department of the Taoiseach which coordinates the updating of Ireland’s set of objectives under the Pact.

This is an agreement which applies to all of the euro area Member States – as well as Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania – and its focus is primarily on areas that fall under national competence. The Pact refers to a commitment by Member States to engage in structured discussions on tax policy issues, for example, to ensure the exchange of best practices, and fight against fraud and tax evasion while acknowledging that direct taxation remains a national competence.  There is no commitment in the Pact on CCCTB. It simply says that: “Developing a common corporate tax base could be a revenue neutral way forward to ensure consistency among national tax systems while respecting national tax strategies, and to contribute to fiscal sustainability and the competitiveness of European businesses.

The Commission has presented a legislative proposal on a common consolidated corporate tax base”.There is no conditionality placed on the commitment made by Ireland in this statement.

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[The list is here but you should read the notes below to understand what you’re looking at]

It was all the way back in 1968 when one of the Dail’s most characterful TDs, Fine Gael’s Oliver J Flanagan let the cat out of the bag when he appeared on Gay Byrne’s Late Late Show and without a care in the world confidently announced “my Party does not believe in jobbery but I am a firm and convinced believer in it. I do not see anything wrong in a TD getting a job for a friend. I have found jobs over the past 25 years for numerous people from Laois-Offaly and Dublin and any time I hear Fianna Fail being criticised for putting their friends into jobs, I am angered because I am not in the same position to put my friends into jobs” A couple of days later, then-Senator Garret FitzGerald hit back and said “people who believe in jobbery have no place in Fine Gael. Such people are not fit to hold office in a Fine Gael government” I think we can all agree Garret FitzGerald was a Colossus in Irish politics and Enda Kenny hasn’t attained that station, at least not yet.

On Saturday, the Independent reported on Irish senators and TDs employing their spouses and relatives as parliamentary or secretarial assistants. The comprehensive list of TDs and senators and their assistants has been obtained on here and can be accessed as a spreadsheet here. The Independent did a bit of digging and concluded that 27 TDs and senators employ relatives. Poor old Labour Party chairman Colm Keaveney was piqued to be singled out by the media for employing his wife as a parliamentary assistant with a salary reported to be €52,000 per annum, but there appear to be plenty of relatives employed based on surnames alone, but given the modern practice of spouses not taking their husband’s surnames and relatives generally having different surnames, all the relatives are not immediately apparent – the Independent did some digging but even it said that “at least” 27 members were employing relatives.

You might be surprised to see TDs and senators giving employment to 377 people, the salaries aren’t shown but from the Indo’s reporting appear to be in the €25-55,000 range. And it should be said that those politicians contacted by the Indo insisted they had the right person for the job. Happy coincidence that it stayed in the family then!

It should be said that some of the people shown may be working part-time or on a job-share basis. As to the staff entitlements for TDs and senators, these are:

(1) TDs are entitled to one secretarial assistant

(2) Senators are entitled to 50% of one secretarial assistant.

(3) TDs also select from one of the following options:

(a) one additional full time staff member at the level of parliamentary assistant

(b) a fully Vouched Allowance Option:

(c) a reduced Vouched Allowance and an un-vouched secretarial allowance

(4) Senators also select from one of the following options:

(a) Staff Option: Additional 50% of one Secretarial Assistant

(b) fully vouched allowance Option, or

(c) an unvouched secretarial allowance and an additional 25% of one secretarial assistant.

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One of the common criticisms directed at NAMA concerns the pay and perks of its staff. With average salaries of €100-110,000 a year, they’re not exactly being pauperised even if there was upset at NAMA HQ in February this year when bonuses for 2011 were cancelled. But a common perception is that NAMA employees, who have a maximum lifespan of eight years with a scheduled termination of the Agency in 2020, are receiving very generous pension benefits. Not so, according to a parliamentary question last week, and indeed NAMA staff seem to be getting far less than some in the private sector. NAMA appears to be contributing approximately 11% of gross salary to its pension scheme, and in addition, NAMA staff are required to pay the public sector pension levy*

Last week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan for the cost of pension provisions at the Agency in 2011 and the estimate for 2012 – the full exchange is shown below. On the basis of NAMA having 220 staff in 2012 and an average gross salary of €105,000, the €2.5m estimate provided by Minister Noonan cost works out at 10.8% of gross salary.

How does the 10.8% NAMA contribution compare with the private sector? It will vary of course, but on Saturday last, the Irish Independent carried a feature on pay and perks in Ireland’s unions. In fact it only had the current salaries of three union leaders, the other five were from 2009 or were estimates or ranges.  And in five additional cases, the unions refused to provide responses, and it seems the Indo forgot completely about the NUJ, UCATT, GRA, AHCPS, ESBOA, MLSA, TSSA, VI, POA or the AGSI. But the Indo did establish that Larry Broderick at the Irish Bank Officials’ Association earns €132,455 and is provided with a defined pension benefit contribution of €46,359 or 35% of his salary.

The NTMA which is NAMA’s parent organisation says in its annual report that it contributes an overall total of 25% of gross salaries to the NTMA pension scheme, but that is higher than NAMA’s 11% because presumably, the NTMA is guaranteeing the final salaries of members which was common until 2008-2010, whereas NAMA’s new employees recruited in 2010 and later will presumably be provided with pensions reflecting average career salaries.

So, not as gold-plated as you might have thought.

Deputy Pearse Doherty: To ask the Minister for Finance the total cost of pension provisions for employees at the National Asset Management Agency in the 12 months ending December 2011; and the estimate of pension provisions at NAMA in the 12 months ending December 2012.

Minister for Finance, Michael Noonan: I am advised by NAMA that the total cost of pension provisions for NAMA staff in the 12 months ending December 2011 was €1.8m, as disclosed in note 36 of NAMA’s 2011 audited financial statements [NWL comment: see extract of note 36 below].

All NAMA staff are employed by the NTMA and the cost of pension provision represents the employer contributions made by the NTMA to the NTMA Pension Scheme on behalf of staff assigned to NAMA. NAMA estimates that employer contributions for the 12 months ending December 2012 will be €2.5m. All NAMA staff are subject to the public sector pension levy.

*  3% on a salary of €15,000
5% on €25,000
6.4% on €35,000
7.2% on €45,000
7.7% on €55,000
8.1% on €65,000
8.5% on €85,000
8.8% on €100,000
9.2% on €150,000
9.4% on €200,000
9.6% on €300,000.

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