Business News

Digital tax kept alive by France and Germany

Europe’s efforts to tax large tech companies were kept on life-support yesterday as France and Germany proposed a final-hour compromise that scales back the broad plan initially envisioned by Paris.

Ireland, along with other countries including Sweden, opposes the tax plan and even the watered down proposals will face resistance.

The updated proposal is to tax the European advertising revenue of digital companies at 3pc. That’s watered down from an initial plan to set a levy on all digital revenues of large multinationals.

The new plan would generate about half the revenue previously planned and mainly hit Google and Facebook, which dominate the online ad market, according to an official with knowledge of the matter.

Both companies are among Ireland’s biggest employers and pay significant corporation taxes here, though the bills are a tiny fraction of the massive revenues booked here.

“Like any European compromise, some will be disappointed. They’ll say it’s not enough and I can understand them,” France’s finance minister Bruno Le Maire said.

The tax plan requires unanimous support to come into force as EU-wide legislation.

The Irish position is that any major changes to international taxation should be agreed through the Organisation for Economic Cooperation and Development (OECD) level – where the US and other big non-EU countries are also represented.

Finance Minister Paschal Donohoe is understood to have reiterated that position at yesterday’s meeting in Brussels.

“The Minister continues to have strong principled concerns about this policy direction as previously outlined. As other countries mentioned, the right and safest way to deal with this is through the OECD to find consensus on global matters. Ireland will engage constructively over the coming weeks and months,” a spokesman said.

Finance ministers from reluctant countries didn’t give their backing to the narrowed Franco-German plan at the meeting, but said they wouldn’t stand in the way of further talks. “I promise to be constructive and I’m ready to look at the proposal, but I still have serious concerns with it,” said Finnish Finance Minister Petteri Orpo.

A draft of the new proposal will be presented by the European Commission within weeks and put to a vote of member states in 2019.

Article Source: http://tinyurl.com/kbwqb42

Mortgage approvals jump by 11pc as values also increase

Mortgage approvals jumped in October, both in terms of volume and value.

Across all types of borrowers, banks approved a total of 4,262 mortgages in October, up 11.4pc month-on-month.

This is a 13.6pc increase in approvals year-on-year, figures from the Banking and Payments Federation Ireland show.

First-time buyers accounted for the lion’s share of activity, with 2,014 mortgage approvals.

The figures also show the value of mortgage approvals rose by 11.4pc year-on-year, and 13pc when compared with the previous month.

Mortgages approved in October 2018 were valued at €929m, of which first-time buyers accounted for €446m.

Meanwhile, the level of re-mortgaging or switching approvals rose on a year-on-year basis by 71pc both in volume and value terms – albeit off a low base.

Commenting on the figures, Felix O’Regan, director of public affairs at the Banking and Payments Federation, said: “All segments of the mortgage market contributed to an overall increase in annualised approval volumes and values in the 12 months to end-October 2018.”

Last month, following a review, the Central Bank said the rules dictating the amount of money people can borrow for a home and the size of deposits needed are to remain unchanged.

Introduced in 2015, the rules are in place to stop banks over-lending and consumers from over-borrowing.

The rules have been credited with slowing down the pace of house price growth.

Article Source: http://tinyurl.com/kbwqb42

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Should I accept pension transfer value?

Query: I left my former employer two years ago after working there for almost 20 years. I have an entitlement to a pension from that company’s defined benefit (DB) pension scheme. I have received a letter from my former employer, offering me an ‘enhanced transfer value’. Should I transfer my benefit entitlement out of that DB scheme. I have a defined contribution (DC) scheme with my current employer. What do I need to bear in mind when coming to a decision? John, Carrick-on-Shannon, Co Leitrim

Answer: There has been a big decline in the number of defined benefit (DB) pension schemes in recent years. For many schemes, a combination of increased longevity, low interest rates and changes in accounting rules have resulted in scheme liabilities outweighing assets – a funding deficit, and an increasing cost burden on sponsoring employers.

Many schemes are either closing to new entrants, closing to future benefit accruals or winding up altogether. An added problem for employers and trustees is that for many DB schemes, deferred members outnumber current active members. (Deferred members are former employees who still have a benefit entitlement in the scheme and have not yet retired.)

In an attempt to ease the administrative and financial headache associated with these scheme members, many trustees and employers have contacted former employees and reminded them of the option they have to transfer out to alternative pension arrangements. Sometimes a financial incentive to do so is offered.

There are a number of things to consider when deciding whether or not to transfer out of your DB scheme.

The first and most important factor to understand is that if you transfer out of the DB scheme of your previous employer, you will be transferring your DB benefit into a DC arrangement – either the DC scheme you have with your existing employer, or a buyout bond which you take out yourself. If transferring to a DC scheme, the investment risk in relation to the pension fund passes from your former employer to you personally.

On first impressions, a DB pension scheme is the best type of pension you can have – they’re often referred to as ‘Rolls-Royce’ pensions. A DB pension promises to pay you a pension based on a percentage of your final salary so planning for the future is easy. However, the ability of a DB scheme to pay you a pension based on your final salary depends on the scheme’s ability to fund its pension obligations for all members going forward. Benefits under DB schemes are not guaranteed. If a scheme’s assets are not sufficient to pay the benefits (liabilities) and the employer is not in a position to meet the shortfall, the pension promised to you may have to be reduced.

Therefore the current funding position of the scheme is an important consideration if you are offered a transfer value. If the scheme is not fully funded, this will be reflected in the transfer value provided to you.

That’s not to say that if a scheme is currently in deficit, it will remain so – or that an employer company will not be in a position to eliminate the deficit going forward. The opposite is also true. A currently fully funded scheme may not remain so. Consideration therefore needs to be given to the financial health of the scheme, and the future financial health of your former employer – in so far as this can be determined.

Some DB schemes offer enhanced transfer values – where you typically get a better transfer value than a shortfall in a DB scheme would typically allow for – to try to encourage existing members to leave the scheme.

If taking any transfer value to a DC arrangement, you would need to calculate the investment growth which you would need on that transfer value to provide you with the same – or a higher level of benefits – than the DB scheme was promising to pay. The required level of investment growth (which you would need to give you equal or higher benefits than the DB scheme) may well be accompanied by a level of investment risk which you are uncomfortable with. For this reason, many deferred members of DB schemes have in the past decided to remain in the scheme.

However, the financial pressures which many of the employers who provide DB schemes are under have made people reconsider.

Deciding on whether to take a transfer value from a DB pension scheme is an important decision and it cannot be reversed. It is important that all of the options available are reviewed and considered carefully.

If you stay in the DB scheme, the current financial health of the scheme may well improve or diminish over time.

Transferring out may well give you greater flexibility in terms of when and how to access your benefits, what the pension invests in, how much income to take in retirement (you would no longer be limited to a specific amount each year) and so on.

There are risks involved in staying in the DB scheme – or in taking the transfer value. However an enhanced transfer value does reduce the risks of taking a transfer value somewhat. Get independent financial advice before making your final decision.

Article Source: http://tinyurl.com/kbwqb42

Mortgage approvals jump by 11pc as values also increase

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Italian stocks lead Europe in recovery driven by banks, technology

European shares climbed modestly at the end of a volatile week, with banks and technology stocks, which have been hit hard by growth worries, leading the way, while Italian stocks rallied as bond yields fell.

The pan-European STOXX 600 managed a 0.2pc gain by 0830 GMT, while Italy’s FTSE MIB outperformed with a 0.8pc rise.

Italian banks climbed after a press report that Italy’s EU Affairs Minister Paolo Savona is considering resigning over the government’s decision to challenge European Union budget rules. Savona denied the report.

The banks index climbed 2pc as bond yields slid, boosting lenders who have large sovereign bond portfolios.

Banco BPM shares rose 3.1pc, while Mediobanca, Unicredit, UBI Banca, and Intesa Sanpaolo gained 1.3 to 1.8pc.

Renault shares climbed 3.2pc in a modest recovery after the carmaker dropped 8.4pc on Monday when CEO Carlos Ghosn was arrested over allegations of financial misconduct.

Ericsson shares rose 2.1pc and Nokia climbed 1.3pc as traders saw a positive read-across from a Wall Street Journal report that the US government is asking allies to shun telecoms equipment from China’s Huawei.

Earnings disappointments drove the biggest losses on the STOXX.

Shares in stone wool insulation maker Rockwool dropped 8.4pc after its third-quarter results.

German industrial machinery group GEA fell 8.6pc after it cut its outlook for 2018 cashflow margin.

M&A was a driver in the small-cap space where UK-listed regional airline Flybe surged 19pc after Sky News reported Virgin Atlantic is in talks to acquire it.
Article Source: http://tinyurl.com/kbwqb42