The finance minister Paschal Donohoe travelled to Davos, Switzerland, last week for its self-important World Economic Forum, to be lectured on morality by an Italian hedge fund manager. How humbling.
Cabra’s finest was sent to the Alps to defend the corporate tax rate, described as “borderline criminal” by Davide Serra of Algebris. Also on the panel were Oxfam executive Winnie Byanyima and the economist Joseph Stiglitz. Donohoe was on a hiding to nothing.
It seems that tax-wise, this country is now about as politically correct as the defunct Presidents Club lech fest in London’s Dorchester hotel. We are being positioned at the very vanguard of immoral corporate culture.
Our “borderline criminal” tax rate is, of course, not the headline 12.5% but the 0.02% effective tax that, Serra says, Google paid here for many years. Serra adds Ireland has contributed just €150m net to the EU budget since joining, yet has enabled Google to escape paying taxes on its European profits, depriving European citizens of €20bn. Gulp.
Serra wants Ireland to collect taxes from Google, charged at 12.5%, and pay the money into the EU budget.
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Does Serra’s analysis stand up to close scrutiny? Probably not. If Ireland could move on the multinationals, would the companies not merely tweak their corporate structure and move elsewhere? Probably. Yet at this point, does anybody care? No.
The narrative is set, and it bodes ill for Ireland’s attempt to rally support across the union for opposition to an EU-wide digital tax. Revenue has stated that a digital tax could do serious damage to the corporation tax base here, now 16% of the total tax take.
The economist and fiscal council head Seamus Coffey, who knows more about multinational corporate tax than Signor Serra, has urged the government to get serious about establishing its rainy-day fund. Change is a-coming.
Coinciding with the cut in corporate tax rates in America, it all points to a period of great uncertainty. And not just for politicians and civil servants.
Sidney Rosenblatt, chief executive of Universal Display, an American maker of light displays, was pressed on how the new US tax rate would affect his business. The company routes much of its international sales through Ireland. He makes the point that, even after the changes, the rate here is still lower.
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“It gives me a headache when I think about it,” he said. He is not alone.
Glenveagh builds cash pile
The builder Glenveagh Properties has enjoyed a meteoric rise since floating on the Dublin exchange last October. The shares are up 25%, quite an achievement given that the bulk of the company’s land portfolio at flotation did not have planning, and it did not sell a single house last year.
The private equity company Oaktree Capital Management and the builder Bridgedale are the drivers behind Glenveagh. Both are already sitting on handsome rewards. Oaktree was paid a €10m “pay for play” fee at the time of the flotation. It also shoveled the bulk of the sites into the new company. For this, it received some 110m shares.
Bridgedale boss Stephen Garvey received 4.4m shares for reversing his contracting business into the vehicle,
as well as an interest in land at Ballyboughal, north Dublin.
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In trade speak, Oaktree and Bridgedale red-booked the sites. They included lands at estate agent valuations, not at cost. The site at Ballyboughal was acquired from Bridgedale and a partner for close to €4.5m. It had traded for less than half that price within the previous year.
Before deciding to float, Oaktree tried to sell sites privately and failed. The Glenveagh prospectus makes a very honest admission in this regard. It says the “price paid or payable” for sites may not “necessarily represent the price at which a third party would acquire or sell the sites”.
These properties may ultimately represent stonking good value, and the company has been busy buying some attractive sites with the €550m raised in the float. However, it is clear that Oaktree and Bridgedale did a good deal at the time of the IPO and are already in the money.
Oaktree is also free to start selling down its stake in March after a lock-up of just six months. Though the stock has risen steeply, trading has been slim, and offloading a big chunk would certainly be a test of the market for the stock. Still, a glorious exit awaits
Early release from Malin
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Two years ago Malin, a life sciences investment company, lifted a share sale restriction to allow certain directors to cash in part of their stakes 18 months ahead of the expiry of an agreed lock-up. The executives, including the former Elan head Kelly Martin, sold the shares at €14.40.
Last week Malin placed shares at the prevailing market price of €8.80. The original lock-up, set at the time of the 2016 float, was due to end next March. That was one lock-up worth escaping.