Monthly Archives For June 2013

Those Darned Public Sector Pensions

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Public sector pensions – is there any three-word formulation more likely to angry up the blood? Not likely (except, maybe, ‘public sector pay’). Mention public sector pensions in polite company and animal sounds will be heard. We are constantly told that we can’t afford public sector pensions, they are a burden on the taxpayer (the private sector taxpayer, the public ones don’t count as they will become a burden when they retire), that they will in a few years sink the economy.

Listening to the debate, you’d think it was public sector pensioners that caused the fiscal and economic crisis, sank the banks and forced us into a bailout.

But a few facts that are emerging suggest otherwise (a few facts are always a healthy tonic to unsubstantiated assertions). WorldByStorm over at Cedar Lounge Revolution pointed to the Sunday Business Post article based on documents obtained under the Freedom of Information legislation:

‘A quarter of public service pensioners receive a pension of only €5,000 annually, according to government documents [and] almost half of all public service pensioners get a pension of about €10,000 or €11,000 annually.’

25 percent received a pension of only €5,000? Almost half on €11,000 or less? Can this be true? And, if so, where does that leave the ‘public-sector-pensions-are-ruining-us-school’?

Well, yes, it can be true. The latest Analysis of Exchequer Pay and Pensions Bill shows that the average public sector pension is €20,800 a year. It should be noted that much of this includes payments for spouses. Further, many recipients do not receive a social insurance top-up pension.

Of course, this doesn’t cost the state an average €20,800 per year. Some of this will be returned via the tax system. Further, the pension income is returned to the economy in spending, resulting in greater economic activity and consumption tax revenues.

This doesn’t deter the great campaigners.

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NAMA: Speculating on CUI BONO

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One of the main criticisms of NAMA, and there are many, is that rather than dealing in the most effective way, both in terms of cost and social benefit, with the legacy of bad debt created by frenzied speculators during a credit bubble, it is instead designed to soften the losses for those who benefited substantially from that socially manufactured glut of liquidity and to reignite the property market speculation that got us where we are today.

Proving that or even making such a claim is not straight-forward of course, due to the opacity of the institution itself and the length of time that it is supposed to do its work, for the benefit, we are told, of those who live and work in Ireland.

However, I couldn't resist the temptation to provide a rough sketch of what appears to be going on at the moment. The following is a bit scrappy, so I apologise in advance if its difficult to follow my point, but these posts are often an attempt to work things out with a view to improving on them at a later date.

Of the original NAMA portfolio fifty-four percent are in Ireland, around 34 percent in mainland Britain and 13% in the rest of the world, which oddly includes Northern Ireland.

Around eighty percent of NAMA's sales so far have been in Britain.

This suggests that much of the UK portfolio has been sold off.

NAMA is viewed by international investors as having been a very good idea,” U.S. billionaire Wilbur Ross, whose WL Ross & Co. owns 9 percent of Bank of Ireland Plc, said in an e-mail. The strategy of focusing on U.K. sales first “provided near- term proceeds from a relatively stronger market while not flooding the Irish market before the sovereign had stabilized,” he said.”

So NAMA is now focusing on selling it's Irish portfolio as the market 'has found its floor'.

Floored

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Childcare: On the Verge of Losing Another Social and Economic Opportunity (Again)

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We are on the verge of avoiding the fundamental issue regarding the childcare crisis; namely, that a private sector model of delivering childcare will keep the service beyond the reach of most parents (except at an exceptionally high cost) and will undermine the quality of care for children. Fintan O’Toole gets it:

‘Preschool education is a vital public good. There is an overwhelming public interest in the provision of high quality early education to all children, regardless of their family circumstances. . . Childcare is a public project, an expression of a shared social commitment to common values. . . .This was recognised in the commitment of public resources to the provision of one year of free preschool education. But that commitment is trumped by a very different imperative – the logic of profit. Instead of childcare being a collective public project, it has been turned into just another business. . . The outrageous practices of some of the biggest commercial childcare providers are not throwbacks to the past. They are harbingers of the future.’

In the weekend media there was a fight back against any idea that childcare should be a public affordable service accessible to all parents regardless of means. We had Brendan O’Connor with these bon mots:

‘What was most evident from last week’s discussions is that the State is not even able to get it together to properly inspect crèches. How this proves it should be running them instead is beyond me.’

Ooookkkkaaaayyyy – let’s see if I get the logic of this. Public sector inspections cannot keep up with the negligence of certain commercial childcare providers. This is proof that we must continue to rely on . . . those same commercial childcare providers. Geez, it must be great to write for the Sunday Independent.

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Ireland’s Country Capture is Complete

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Arthur Beesley in his May 22nd article Scrutiny of Ireland Begins to Bite in Apple Tax Enquiry suggests that foreign companies come to Ireland primarily for the tax benefits, but does so by using inaccurate information. So the reason for the movement of investment into Ireland, according to Beesley, is entirely due to our ability to facilitate tax avoidance even though the government has gone to some lengths to deny that. But in order to make that argument he has to distort what is already widely known.

Note the use of 'continual improvement' in the following:

“The continual improvement of the tax terms Dublin offers investors has fostered a huge increase in the amount of business funnelled through the Irish operations of multinational companies. The headline tax rate was reduced to 12.5 per cent in 2003 from 38 per cent in 1997, when the combined net profit of US corporations in Ireland stood at $8.58 billion. By 2005, this had risen to $48 billion.”

The increase is due to a number of factors, but the change in the headline corporate tax rate in 2003 was not one of them.

Dr. Proinnsias Breathnack of NUI, Maynooth corrects him in a letter to the Irish Times on the 4th of June.

A chara, – Arthur Beesley (Business, May 22rd) wrote that Ireland’s rate of corporation tax was reduced from 38 per cent to 12.5 per cent in 2003. This is incorrect.

Prior to 2003, the rate of corporation tax on profits from manufacturing and international (ie export) services – which covers most activity of foreign firms operating in Ireland – was just 10 per cent. The 38 per cent rate applied to all other corporate activity, and related to non-manufacturing activity within the Irish economy (mainly conducted by Irish businesses).

Following a finding by the EU that this distinction was discriminatory, a standard corporation tax rate of 12.5 per cent, applicable to all corporate activity in Ireland, was introduced in 2003. Thus, what was, in effect, the tax rate applying to foreign companies was increased in order to compensate the government for the tax lost through the reduction of the tax rate on domestic non-manufacturing activity.

As it happens, the “headline” rate of 12.5 per cent is of little relevance as far as the foreign corporate sector is concerned, as the average rate of tax paid by this sector is nowhere near this level. – Is mise,”

Not only did the headline rate for foreign companies increase in 2003, for many years before that it was officially zero. Apple and many other MNCs that set up here in the 80s were able to enjoy a 10 year tax holiday, for example. So why does Beesley distort this well established fact?

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Syrian forces and Hezbollah retake Al-Qusayr; the worried West pushes for war

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Syrian government forces, reinforced by fighters of the Lebanese resistance movement Hezbollah, have today made a major breakthrough in their fight against foreign-backed militants holding the strategic town of Al-Qusayr, which lies on the road from Damascus in the south of the country to the north-western coastal cities of Tartus and Latakia. Syrian state television and the Lebanese Al-Manar channel, run by Hezbollah, stated this morning that Syrian troops and Hezbollah fighters had re-taken the town after a decisive two-week battle with rebels.

A Hezbollah fighter reportedly told news agency Reuters: “We did a sudden surprise attack in the early hours and entered the town. They escaped”, ‘they’ referring to the insurgents. Sources for the various rebel groups fighting the government in Syria confirmed that their militias had abandoned the town and retreated north to the area of Debaa, not far from Qusayr; like most rebel sources this claim is unverified. What is certain is that after two weeks of intense fighting and many casualties on both sides, the town of Al-Qusayr, a vitally important waypoint on the main arterial roads linking the north and south of the country, is back in Syrian hands. For the rebels, it is a major defeat.

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