All the signs are that the EU Commission will shortly issue its final decision on the tax arrangements between Ireland and Apple. This week, the row started to heat up. Everyone expects the European Commission to stick to its original decision that the deal involved illegal state aid to the American giant. But the question is what the commission says should be done about it, and particularly how much tax the Irish Government should recoup.
On Wednesday, the US treasury come out fighting, taking the unusual step of issuing a “ white paper”, which was a strong attack on what the commission was doing. While it was not specifically about Apple – the European Commission is also investigating the tax affairs of a number of other US giants – no-one was in any doubt that this case is the “ big one”.
The treasury said that the EU commission was acting beyond its powers as a “supra-national” tax authority. It went on to argue that, as US companies had no notice of this new approach, it was particularly unreasonable for the commission to tell countries to seek to recoup tax payments going back years. The commission’s approach, it added, threatened the whole multilateral approach to tax.
Add in a warning about the potential “chilling” impact on transatlantic investment and a not very veiled threat to unspecified retaliation and you can see what is at stake here.
The commission is expected to press ahead and make its decision. But how much will it say Ireland should collect from Apple? Either way, it looks very likely that this affair – already three years cooking – will now head to the European courts, meaning we will not get a final outcome for a few more years.
COMPANY RESULTS
In a big week for company results, CRH was in focus, promising a return to dividend growth for the first time in seven years and signalling that full-year earnings will top €3 billion. The company lifted its interim dividend by 1.6 per cent to 18.6 cents, after reporting figures slightly ahead of market expectations. Chief executive Albert Manifold said continued positive momentum in the Americas and some recovery in Europe would continue to boost performance.
CRH spent a massive €6.5 billion buying assets hived off after the merger of Lafarge and Holcim, but such is its earnings growth that the market remains confident that the extra debt taken on to fund this will quickly reduce. And now, in the relentless drive to growth, Manifold is signalling more acquisitions on the radar, with the possibility of spending €1.5 billion to €2 billion in the year ahead.
Meanwhile, merger costs left Paddy Power Betfair with a £47.5 million (€55.4 million) loss at the end of June. The gambling giant created last February, when Paddy Power and Betfair joined forces, said that revenues grew 18 per cent to £759 million in the six months ended June 30th from £642 million during the same period last year.
Operating profits grew 39 per cent to £147.6 million from £106.5 million over the same period. However, a £195.1 million charge for February’s merger left it with a £47.5 million loss. The group said that it expected full-year earnings to be £365-£385 million.
Kingspan had strong results, reporting that pre-tax profit rose 54 per cent to €155 million in what was a record first half for the insulation and building materials maker. Revenues rose 19 per cent to €1.47 billion in the six months ended June 30th from €1.24 billion during the same period last year.
Trading profit also rose by about 50 per cent, growing to €167.3 million from €111.7 million, well ahead of the €140 million and €150 million predicted by most analysts. Chief executive Gene Murtagh said the Cavan group expected the momentum to continue into the second half.
IFA ROW OVER LEVIES
The Irish Farmers’ Association (IFA) faces substantial losses following a row over the collection of levies from farmers.
Larry Goodman’s ABP has thrown the cat among the pigeons by ceasing automatic collection levies on farm sales, a vital source of funding for the IFA.
The company claims it was acting on foot of persistent complaints from farmers about the way the tariff was administered.
The IFA, however, claims the move was designed to sabotage its funding arrangements and weaken its standing in the farming sector.
In response, it cancelled ABP’s authorisation to collect it, effectively jettisoning up to €300,000 in contributions from ABP suppliers.
Now all eyes on whether other processors will follow Goodman’s lead, a move that could have disastrous consequences for the farmers’ group, which is still reeling from a string of pay scandals involving former bosses.
MOTOR INSURANCE CRISIS
The Irish motor insurance market is in crisis, with premiums rising by almost 40 per cent a year. And there is little sign of relief for drivers. This week’s news that Gibraltar-based underwriter Zenith Insurance is to withdraw from the market will not lead to the same immediate crisis for policyholders as the Setanta collapse. Existing policies will remain in force and claims will be met. It further reduces competition in the market meaning premiums will probably continue to rise. Of course the problem appears to have been that previous competition for market share drove premiums down to unsustainable levels. Add in the high cost of claims here and you have a toxic mix which is hitting policyholders hard in the pocket.
EMPLOYMENT RISES
Amid all the dire warnings about Brexit, there was further good news for the economy this week with the Central Statistics Office’s Quarterly National Household Survey showing the number of people working in the State has reached two million for the first time since 2009.
The survey revealed unemployment had also fallen by 23,400, or 11 per cent, in the year to the end of June, pushing the total number out of work down to 187,800, marking the 16th consecutive quarter in which unemployment has fallen.
While unemployment rates are up, with the July figure at 8.3 per cent as against the previous 7.8 per cent, the change was due to an increase in the labour force, rather than newly unemployed people.
