Archive for December 8th, 2012

Scratchcard Economics of the Week


There is growing unease about the Government’s calculation of yield from the property tax. Not only was there no obvious cognizance taken of the existing €160m household charge or the €70 Non Principal Private Residence in Budget 2013 workings – you’d expect the  non-continuance of these two taxes to be shown alongside the €250m to be raised from the property tax in 2013 and the €500m in 2014. After all, if there is not to be any household charge or NPPR in 2014, then you would need deduct €230m from the €500m and in 2013, deduct €160m from the €250m.

There doesn’t seem to be any great foundation to the estimate of yield for property tax, which is strange given the expert report was on Minister for the Environment, Community and Local Government Phil Hogan’s desk since June 2012.

Seems like the Government has committed to a measure but will only know how much it will bring in, at the end of 2013. Kinda like buying a scratchcard and only afterwards finding out if you have won anything.

Builders of the Week


In China, it is reported that the world’s tallest skyscraper is to be built in just three months. There has been much skepticism about the plan, but perhaps if they employ Irish builders, this feat can be accomplished. After all, we appear to be world experts in constructing Chinese Walls in professional fims to prevent conflicts of interest. So for the international audience, it is not uncommon to find in Ireland, barristers or firms of accountants or lawyers acting for two sides in a dispute but to find the same advisers on the other side of a table in a separate dispute. These firms all claim to operate Chinese Walls so that one part of a firm is not influenced by another. That must be more difficult with barristers, yet we find the same barrister representing a party in the morning but being on the opposing side in a different dispute in the afternoon.

During the week, Judge Kelly’s judgment was published in the case where the Quinn children had opposed the appointment of receivers because of conflicts of interest. The judge didn’t accept the childrens’ case and noted that another judge, Judge Dunne had said she “was not a great believer in Chinese walls”. The receiver in the Quinn case went on to appoint top-tier Irish legal firm, McCann Fitzgerald who would need to be impartial when acting for the receiver but they also represented the bank, IBRC with whom the Quinn children are in the wars. The court seemed to accept the assurances or “satisfaction” of the receiver, see below, that there was no conflict. Yes, world leaders in constructing Chinese Walls.

“The court did not seek to impose any stipulations in relation to the proposed receiver’s professional advisers, but instead indicated a position should be avoided whereby an adviser was required to put Chinese walls in place, in order to avoid a possible conflict of interest. I am aware that McCann Fitzgerald also represent IBRC in this matter. I am however satisfied that no conflict arises between McCann Fitzgerald’s role as advisers to the bank and advisers to me as court appointed receiver and accordingly the concern expressed by the court does not arise in this case.”

Man of the Week

Just honoured at the Irish America Annual Business 100 in New York, and compared to Andrew Carnegie “who made billions and gave it all away in the final decades of his life” and philanthropist Chuck Feeney, our own, or at least Malta’s, very own, Denis O’Brien was honoured in New York this week where his unchallenged humanitarian work in Haiti and with charities Frontline and Concern was justly lauded by Niall O’Dowd, boss at website IrishCentral.com who is less kind about Ireland where there’s “great hatred, little room”  and where some “he emerged with the country’s first cell phone license and turned it into pure gold and some have never forgiven him for upsetting the cozy coterie. How he got it still exercises some of the chatterati in Ireland.”

Mind you, this was also the week where global organization, Transparency International knocked Ireland down 11 places to 25 in world rankings of most honest countries, blaming the deterioration on the failure of the administration to get to grips with abuses of power, and Denis O’Brien gets at least two mentions in the statement accompanying the release of the index.


Elsewhere, Transparency International ranked Haiti at position 165 out of 176 countries as being the most corrupt in the world. Myanmar, or Burma as it was formerly known a,. is ranked at 172 in its 2011 Corruption Perceptions Index . According to IrishCentral , Denis’s “next assignment will be Burma, he says, or Myanmar if you prefer. It is a country with a population of 63 million, where only two million have cell phones, which has recently opened up to outsiders”

Image of the Week

If a week is a long time in politics, then eight months is a veritable epoch, and yet it was only eight months ago when Minister for Social Protection rocked the Coalition boat by criticizing the decision of An Taoiseach, Enda Kenny to share the platform on the New York Stock Exchange with Denis O’Brien, following the conclusion of the Moriarty Tribunal, the findings of which An Taoiseach said he accepted and which were “adverse” towards Denis. But during the week, the Minister was spotted sharing a row of seats with none other than Denis on an occasion at Dublin City University where US Secretary of State, Hillary Clinton opened a new centre.

Measure of the Week

“handful” = 18 as in Northern Ireland First Minister, Peter Robinson’s statement “Those who supported the removal of the Union Flag on all but a handful of days from City Hall have started a debate which has undoubtedly damaged relationships in the Council and beyond” In fact, according to the BBC, the number of designated days per annum comes to a total of 18. Trouble erupted this week after Belfast City Council (pictured above) dealt with a motion from Sinn Fein and the SDLP to stop the practice of the Union Jack flag flying daily above City Hall in Belfast, this after Belfast’s population falling to about 250,000 with the majority believed to be Catholics – we’ll find out on Tuesday when the religious denomination breakdown from Census 2011 is published – and Unionists on the other hand argued that the existing practice of all-year-round flying of the Union Jack should continue. In the end, the Alliance Party, the small cross-community party which holds the balance of power on the Council, proposed a compromise of flying the Union Jack on 18 designated days each year, and that proposal was carried 29-21. You can watch last Monday’s Belfast City Council’s often-badtempered meeting here.

“modest”= €325 or 19% cut to the annual €1,700 so-called “respite care” grant, announced in Budget 2013. So says Minister for Communications, Energy and Resources Pat Rabbitte. Junior Minister Brian Hayes describes the cut as “drastic”. The grant is provided as a one-off payment to carers of disabled or infirm people, and is called “respite” because it was seen as providing funds for a holiday or other treat to carers. This week, carers were quick to point out the grant is used for rarely used for holidays but to cover necessary expenses like car insurance.

Tax loser of the Week

Shell-shocked home owners learned that from July 2013, they will need stump up a new property tax that will be 0.18% of their home’s market value up to €1m and 0.25% on any value over €1m. The Department of Finance’s calculation of the yield from the tax has puzzled many, and people have been amazed that just a day after the Budget 2013 announcements, the Government has published a 16-page Bill to introduce the new tax and just as puzzling is the late publication of the Thornhill expert report which has been with Minister Phil Hogan since June 2012, alongside the ESRI report upon which the Thornhill report was based.  In 2012, there was a flat-rate €100 “household charge” levied on some 1.6m households and which even at this late stage has a 67-50% compliance rate, depending on which source you believe.


One couple who will suffer with the new tax is the Central Bank’s Fiona Muldoon, the Director of Credit Institutions and Insurance Supervision, who recently unsettled bankers with an uncomfortable speech. Her partner is named by The Phoenix Magazine as Stephen Egan, who the magazine says works for the Irish Bank Resolution Corporation, though he would not appear to occupy any prominent role there. The couple, says The Phoenix, have just bought no 16 Clyde Road (pictured below) for €2.2m and have just been granted “planning permission for a significant refurbishment of the property” – in fact there appear to be a number of applications at Dublin City Council which include an extension, installing solar panels, new doors and changes to the garden and removing an existing conservatory . So how much will the property be worth on 16th May 2013, the date specified as the valuation date for the new tax? Difficult to know, but if it is still valued at €2.2m then the annual tax will be €4,800 being 0.18% of €1m and 0.25% of the excess over €1m, €1.2m.


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It seems this has been quite a good week for the Goodman family, mostly comprising beef baron Larry and son Laurence. The €1 added to a bottle of wine should ensure a steady stream of cross-Border shoppers, and with Newry within easiest travel distance for most of the State’s population, and with the Goodmans developing a significant new shopping centre there, their project at the site of the former Greenbank Industrial Estate should see enhanced footfall as a result of higher shopping costs on the other side of the Border.

And yesterday, the Goodmans are reported to have closed the sale for the former Bank of Ireland headquarters on Baggott Street in Dublin city centre. The building which was being developed by a large consortium that included the UK bankrupt Paddy Shovlin and Tony and Patrick Fitzpatrick, and the larger-than-life Derek Quinlan – or Derrick Quinlan as his friends the billionaire Barclay brothers call him – and the Irish bankrupt, Sean Fitzpatrick and lastly, according to the Irish Times, the CEO of Trinity Biotech, Ronan O’Caoimh. The Irish Times quotes a statement from the Goodman family saying “the property division of Parma Group through its wholly-owned subsidiary Ramly Ltd has purchased the former Bank of Ireland headquarters building in Baggot Street”

Earlier in the year Bank of Scotland (Ireland) and Danske Bank and ACC Bank had Kieran Wallace of KPMG installed as receiver to the property which was subsequently put on the market by Jones Lang LaSalle with an asking price in the €30-35m region. The actual sale price hasn’t been disclosed.  Jones Lang LaSalle described the property as “the best redevelopment opportunity in Dublin” – the property listing doesn’t appear to be on the JLL website. NAMA is not associated with the sale, and it is understood that the Goodmans are not NAMA borrowers.

The 76-year old Larry Goodman is understood to be Ireland’s 15-richest person with a fortune estimated at €750m. Aside from his meat processing business which prompted a tribunal, Larry has interests in  private hospitals including the Blackrock Clinic in Dublin and the Blackrock Clinic in Galway and there has been talk of a new facility in the grounds of the exclusive Adare Manor in Limerick.

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It seems to have gone unnoticed in the Irish media on Thursday as the aftermath of Budget 2013 dominated the headlines and airwaves. But on 6th December, 2012, the National Treasury Management Agency (NTMA) announced that it had bought back €500m of the 5% Treasury Bond which was due to mature four months hence on 18th April 2013. The NTMA gave no reason for its action save to say “as part of its normal operations in the secondary bond market the NTMA has acquired holdings of this very short dated bond which it has now decided to cancel.”

“Normal operations” at the NTMA in the past have not included buying back debt, at least a review of press releases for 2012, 2011 and 2010 indicates this to be the case.

It is interesting that the NTMA which is funded by the Government has used a funding pool which includes the €67.5bn external programme finance from the Troika of the EU, ECB and IMF, to buy back bonds. Although the notice from the NTMA published on Thursday refers to “Treasury Bonds” these were long term bonds issued in January 2002, and there were €5.6bn of these still in issue. Thursday’s announcement means this has reduced to €5.1bn.

The NTMA has come in for some criticism on here in recent months for issuing billions of debt which is not immediately needed, and in fact shouldn’t be until the end of 2013. And the cash raised has been stuck on deposit at the Central Bank of Ireland where it earns 0.09% per annum – and no, there’s no decimal point missing here, it earns the negligible “Euro Overnight Index Average as set by the European Banking Federation on a daily basis

Thursday’s action should save about €9m being the difference between €500m at 5% per annum for 133 days and €500m at 0.09% per annum for 133 days.

But is Ireland now pursuing a strategy of buying back debt and if so, why not issue €5bn of 3-month treasury notes paying about 0.5% per annum and buy back the rest of the April 2013 issue, that would save €90m.

Perhaps we’re more like Greece than we previously made out…

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