Companies preparing for the commencement of the Protected Disclosures (Amendment) Act 2022 in the New Year will need to overhaul whistleblowing policies and processes, but the effort will bring clear benefits, writes Gráinne Madden Encouraging people in an organisation to speak up about their concerns should be a no-brainer. Why would an organisation not want to know about a potential risk? Why would an organisation want an employee to feel the need to go to an external body, such as a regulator or the media, to highlight internal problems? International research repeatedly reinforces that there are two main reasons why people fail to speak up about their suspicions of wrongdoing. First, there is the fear of retaliation. Current Irish and UK law is seeking to address this by offering protection. The second reason people fail to speak up about their suspicions of wrongdoing in an organisation is fear of futility. This is the fear that nothing will be done, even if they do speak up—and this is why having clear policies and processes in place is so important.  The absence of a whistleblowing policy and process in an organisation will certainly send the message that the organisation does not really want to hear about any problematic issues that may exist or arise.  As it stands, in Ireland and the UK, workers are entitled to legal protection against dismissal, or other reprisal from their employer or colleagues, when disclosing concerns about certain issues. Until now, however—except in certain sector-specific areas—most organisations have not been required to put a whistleblowing policy or procedures in place, or to follow up on such disclosures.  The EU Whistleblowing Directive will, however, bring major changes to which organisations operating in EU jurisdictions must now respond. In Ireland, the Protected Disclosures (Amendment) Act 2022 will commence on 1 January 2023, giving effect to the EU Directive. New requirements for organisations There are several key additional requirements that will apply to organisations under the new Act, which are considered below. Employee thresholds For workplaces with more than 50 employees, there will be a requirement to have formal channels and procedures for receiving and, crucially, following up on disclosures. Workplaces with between 50 and 249 employees have until December 2023 to comply, and 250-plus employee workplaces must comply at commencement.  However, all organisations operating in certain sectors will be required to comply at commencement, even those employing fewer than 50 people. This includes:  public bodies; companies subject to EU laws in the areas of financial services, prevention of money-laundering and terrorist financing; transport safety; and protection of the environment (offshore oil and gas installations and operations only). The 2022 Act states that the Minister for Public Expenditure and Reform may, by order, reduce the threshold of 50 employees for specified classes of employers, subject to a risk assessment and public consultation.  Change of definitions and burden of proof Under the new Act, the scope of protected persons will be extended to include non-executive members, shareholders, volunteers, and ‘pre-contractual’ employees, such as candidates applying for a job during the recruitment process before the work-based relationship even begins. Further, retaliation will be more broadly defined. In respect of alleged detriment (be it an act or omission) caused to a person because of the making of a protected disclosure, the employer will have to prove that the detriment complained of was not in retaliation for, or because of, the person having made a protected disclosure.  Administration and staff Confidentiality regarding whistleblowing must be respected by all reporting systems and access to data by non-authorised staff prevented. For staff who are authorised, appropriate training must be given in respect of the handling of reports. Finally, records must be kept of all reports, as well as ensuring follow-up and feedback regarding these reports within certain timeframes.  Blending culture with policy The required process management will mean that many organisations will need to implement issue management systems. Simply having a policy and process in place isn’t, however, going to be an encouragement for nervous employees. Creating a culture in which people feel safe in speaking up—and feel that their concerns are welcomed—is far more important.  So, in addition to having a sound policy and process in place, what other steps should employers consider? Here are seven recommendations: Train managers and team leads to recognise when an issue could be a protected disclosure and, most importantly, to receive reports of potential issues in a calm and welcoming way. Word can spread very quickly about managers not being open to bad news. Think about how whistleblowing is discussed in the organisation and consider whether it is healthy or whether the narrative needs to be changed. Any pejorative language in connection with whistleblowing or speaking up needs to be identified and stamped out. The focus must be on recognising that people who bring risks to our attention are doing the organisation a great favour. It is worth highlighting that research demonstrates that the people who blow the whistle tend to be the most loyal employees who care greatly about the organisation. Ensure that the confidentiality regime is well- communicated and respected so that employees can be confident their identity will not become known if they disclose an issue. Do not become complacent if the whistleblowing policy is not used—rather than indicating a spotless organisation, it could be signalling a poor work culture where people either fear speaking up or just don’t care enough to bother. Remove any ‘good faith’ requirement from policies. The focus should be on the issue reported, not the motivation of the person reporting. Furthermore, there is no ‘good faith’ obligation under Irish or UK law or the directive. Make sure that penalisation is not tolerated. State this clearly in the whistleblowing and speaking-up policy, making sure there are clearly defined processes for reporting claims of penalisation and for following up on claims of penalisation. Provide feedback to a discloser on any action taken in response to their disclosure. The ability to do this will depend on the nature of the issue and the rights to confidentiality of other parties. At the very least, a discloser should be reassured that their concerns have been dealt with appropriately. It is likely that most organisations will need to overhaul their whistleblowing policies and processes in response to the Protected Disclosures (Amendment) Act 2022. The requirements may seem daunting, but help and advice on good practice is available. The benefits are clear, not just in terms of risk management and protection of brand and reputation, but also for the common good.

Chartered Accountant Eamonn Hughes is playing a leading role in Bank of Ireland’s Responsible and Sustainable Business Strategy. Hughes tells Accountancy Ireland about the four-year plan and his goals as Chief Sustainability and Investor Relations Officer  Before joining Bank of Ireland Group in February as Chief Sustainability and Investor Relations Officer, Chartered Accountant Eamonn Hughes had a longstanding career as a sell-side market analyst with more than 25 years’ experience in capital markets and domestic banking.  Having worked most recently with Goodbody, the stockbroking firm, as Irish Banks and Insurance Sector Analyst and, before that, Head of Research, Hughes also had a clear view of the swift rise in environmental, social and governance (ESG) to the top of the financial agenda worldwide. “I could see that ESG was becoming hugely important in capital markets and the financial sector. The climate crisis, in particular, is a critical threat, but also a significant opportunity,” said Hughes. “For our planet, there is no Plan B, but the discussion about sustainability is not just about climate change. It is also about creating a more sustainable business model. Our vision at Bank of Ireland is to be the national champion in Ireland, to use our balance sheet and resources to drive positive change for a better, fairer society and improve the environment. “This gives me a very strong framework to think about my role, because, if we can deliver on our ESG strategy, we can ultimately deliver a more sustainable business model for all stakeholders and positive returns for investors. “The ESG agenda also involves regulators, so disclosure and risk management are very important—and there are reporting frameworks in place, but they are evolving very quickly. This is one of the challenges we face and is also why transparency and the availability of clear data is so important.  “With my background in capital markets, I can clearly see the mobilisation in capital, and I think the banking sector has a very obvious supporting role to play in society’s sustainability transition.” Investing in tomorrow Bank of Ireland published its Responsible and Sustainable Business Strategy in March 2021, a year before Hughes joined the group.  Bank of Ireland’s four-year Investing in Tomorrow strategy set out its own goals to support the green transition, alongside two additional pillars: enabling colleagues to thrive; and enhancing customers’ financial wellbeing. The Investing in Tomorrow green transition pillar included the setting of science-based targets aligning the bank’s lending portfolios with the Paris Agreement. The international treaty on climate change, adopted in 2015 at COP 21, set out a goal to limit global warming to 1.5 degrees Celsius, compared to pre-industrial levels. “Data is key across all three pillars, because reporting is essentially an output of what we are doing in support of climate change, colleagues, customers and the organisation as a whole,” said Hughes. “We need to focus on how we interact with our stakeholders internally and externally and, in my role, investors are obviously a key priority. As investors now have to produce more disclosures themselves, they will need to engage more with us in terms of what we are doing on our own ESG journey.” Clear reporting strategy How Bank of Ireland communicates with, and reports to, stakeholders on the progress of its ESG strategy is a priority for Hughes in his role as Chief Sustainability and Investor Relations Officer. “Ultimately, we need to explain how we are meeting the targets set out in our strategy, and it is incumbent upon us to develop the capacity and skill sets we need to support reporting and strategy delivery,” he said. “My role is to support in delivering across all three pillars, which involves a lot of data-gathering internally, particularly from a regulatory and reporting perspective.” Detailed progress reports on ESG will now be a core part of Bank of Ireland’s annual reporting cycle. “We need to be able to demonstrate clearly that we are creating a sustainable business strategy, enabling colleagues to thrive in the organisation and enhancing financial well-being among customers, in addition to supporting the sustainable transition,” said Hughes. “Transparency is hugely important. There are a lot of differentials in this space, so we need to standardise our reporting; to be able to explain clearly and cohesively what we are doing and why.” Commercialisation is becoming increasingly important as Bank of Ireland continues to implement Investing in Tomorrow, Hughes said. “Like many banks, we are in the commercialisation phase of our ESG strategy with the creation of sustainable finance solutions for, and increasing engagement with, customers. We are supporting and incentivising customers through competitive rates to buy or build an energy efficient home or to retrofit their home or business to make it more energy efficient.” Sustainable finance fund Bank of Ireland recently announced a €3 billion increase in its Sustainable Finance Fund, which will bring it to €5 billion by 2024. The fund covers green propositions, including mortgages, home improvement loans and business  loans.  Bank of Ireland’s inaugural standalone Responsible and Sustainable Business Report, published in June, tracked the progress of its ESG strategy in 2021. More than €1.8 billion in mortgages, home improvement loans and business loans had been drawn down from the Sustainable Finance Fund by the end of the year, the report stated. Thirty-five percent of all mortgages provided by the bank in 2021 were green, rising to 48 percent in the first half of 2022.  Bank of Ireland was also the largest provider of wholesale finance for electric vehicles in 2021, providing finance to 13 of the 15 car manufacturer franchises. The publication of the Responsible and Sustainable Business Report marked a significant “step-change in the tracking and transparency” of the bank’s ESG reporting, Hughes noted.  “Our stakeholders—including customers, shareholders, and regulators—are demanding far greater transparency as to how we are meeting our ESG commitments,” he said. “This report provides insight into our strategic approach, appraisal of our progress to achieve our purpose, and information on the key focus areas we plan to progress in the years ahead. Being clear on ESG, and showing how you are delivering what you sign up to, is now a commercial imperative for all lenders, including Bank of Ireland.” Science-based targets Bank of Ireland has also committed to setting science-based targets across portfolios and operations to align lending practice with the low carbon ambitions set out in the Paris Agreement. “We completed two successful green bond issuances in 2021, raising €1.25 billion with the capital used to finance green buildings, renewable energy projects and clean transportation,” said Hughes. “Thirty-five per cent of the mortgages we provided in 2021 were green and we have also launched a green mortgage product in the UK.” Bank of Ireland is providing finance for the development of at least 750 megawatts of renewable wind capacity across the island of Ireland. The bank is also in the process of decarbonising its own operations—reducing absolute emissions by 88 percent between 2011 and 2021. Social and governance Although supporting the green agenda is a major part of Investing in Tomorrow, the strategy also sets goals for investing in colleagues and enhancing customers’ financial wellbeing. “We recognise the supporting role we can play in Ireland’s response to the climate crisis, but the ‘S’ and ‘G’ are equally important when we consider ESG,” Hughes said. “We have a strategy to improve the financial wellbeing of our customers and to foster a financially inclusive society.” Bank of Ireland was, Hughes said, supporting customers to become more financially confident, while also working to simplify processes, so that the “financially marginalised have easier access to banking services.” Financial health and inclusion  Bank of Ireland is one of 28 banks around the world that have signed the Commitment to Financial Health and Inclusion published in December 2021 under the United Nations Principles for Responsible Banking (PRB). A first-of-its-kind initiative aimed at promoting universal financial inclusion and health in the banking sector, its launch closely followed the publication of the UN’s PRB Collective Progress Report. The report identified financial inclusion as the third most pressing sustainability challenge facing signatory banks, behind climate mitigation and adaptation. “This UN initiative is particularly important in an environment in which we have a cost-of-living crisis and customers are facing major challenges in the medium- to long-term. The question for us is, ‘how can we deliver this particular skill set and support our customers at a time when they really need it?’” said Hughes. Bank of Ireland is also helping customers to “live more sustainably” with the recent announcement of the roll out of bio-sourced debit and credit cards. Launched in October, the initiative will over time replace all plastic debit and credit cards issued by the bank, to help support the reduction of single-use plastic. “If we are to live in a more sustainable way, we need to do things differently, including through our everyday banking. The introduction of bio-sourced cards is a very practical way we can help our customers to reduce their environmental footprint,” Hughes said. “As a bank, we are working very closely with our customers on the sustainability transition. As they deliver, we deliver. It is a symbiotic relationship and an exciting place to be.”  

Originally posted on Business Post 5 November 2022.  Conditions may be chaotic, but the outlook for the Irish exchequer is not necessarily bleak. We live in very strange times if a key determinant of economic success is whether or not the weather will be cold in Europe over the winter. Yet that is the unavoidable consequence of the illegal Russian invasion of Ukraine and the chaos it has created. Chaos is contagious, and dealing with it saps resources, but at least last week’s exchequer returns showed yet another bumper tax harvest in Ireland. It used to be the case that tax yields could be predicted fairly accurately by reference to GDP. If GDP increased, say by 5 per cent, then tax yields would also increase by about 5 per cent. This year at budget time, the GDP growth forecast was 10 per cent – but the tax yield growth forecast, at 19.2 per cent, is almost twice that. A few factors have put the sums askew in our favour. One is timing. A higher proportion of income tax and corporation tax gets collected in the last quarter of the year. Now that budget day routinely falls in October – and it was even earlier this year – predictions of the trend are more complicated. Another factor was the pandemic, which threw all forms of straightforward comparisons with previous years out the window. Thirdly, successive tax policies over the past ten years have narrowed the income tax base, meaning that fewer individuals pay the highest proportion of income tax. That makes calculating a reliable average tricky. As well as all this, we taxed our way out of the great recession mainly through higher Vat rates, but we have forgotten to reduce them. The standard Vat rate of 23 per cent in this country is among the highest in Europe, so a surge in price inflation also means a surge in Vat receipts. Corporation tax yields dominate the exchequer returns. Government never misses an opportunity to tell us how fragile that high yield might be, though there are good reasons for it. Many of the major companies established in Ireland are from the ICT or pharmaceutical sectors, which have shown extraordinary growth and profitability over the past several years. International corporate tax reforms since 2012 have restricted or eliminated opportunities for multinational corporates to locate profits in very low tax regimes, resulting in more tax being paid in this country. In some cases, capital allowances to encourage companies to establish here have expired, leaving more profits within the annual charge to corporation tax. So how might the current chaotic conditions really impact on government capacity to tax, and then spend? During the pandemic, those on higher wages were less likely to lose their jobs. However, this time there are clear signals that some jobs in the ICT sector are vulnerable. Twitter is letting staff go – as is Stripe, which has openly admitted it got it wrong on economic growth and cost management. There are also legitimate fears that some jobs in the lower-end services sectors and hospitality could go, as inflation, higher fuel bills and higher interest rates squeeze consumer spending. This month’s exchequer figures neither confirm nor challenge consumer spending trends, as Vat is paid every two months – and this wasn’t one of them. Despite this uncertainty, it does not automatically follow that the outlook for the Irish exchequer is bleak. International tax rules have not changed and are less likely to do so in an increasingly protectionist world. That is important for any small economy like Ireland’s that is dependent on foreign direct investment. Any disruption to our reliance for tax revenue on the corporate sector, high-income individuals or consumer spend will most likely be caused by poor domestic political decisions, rather than by outside influences. In a period of inflation, there tend to be greater opportunities for employment. It is counterintuitive, but there is an inverse relationship between inflation and the unemployment rate. Higher inflation leads to higher wages, leading to more attractive working conditions. This reality is borne out by a shortage of staff being felt across almost all sectors. It is not going to be easy to get through the current inflationary, fuel security and monetary crises, and it is right to highlight the risks that are not of our own making. But it is not right to identify these external risks without acknowledging that we would do most harm to ourselves with domestic policy mistakes. If we can improve our accommodation, health provision and migrant policy without recourse to increasing the national debt and without damaging confidence in the corporate and consumer sectors, we should be able to manage through the current chaos just fine. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Originally posted on Business Post 22 October 2022.  Last week’s budget correction in the Finance Bill means that trades, manufacturing and services are now treated equally in terms of tax and supports, but landlords and tenants need more. Budgets are tricky things, as the British have recently discovered. They are not merely about balancing the national books. They are about ensuring there is a business environment which can fund national spending aspirations while providing decent levels of employment, wages and spending power. They are also about convincing investors that your country is a safe place to put their money. This is a critical consideration for Ireland, given that about half of our national debt is owned abroad. While there is a high element of drama around budget day, the publication of the Finance Bill last Thursday was a far more mundane affair. If budget speeches are poetry (at a stretch), finance bills are most definitely prose. A finance bill provides the detail of the Budget Day adventures, but also corrects its mishaps. Given that Budget 2023 had involved spending so much money to deal with the cost of living crisis, mishaps such as the concrete levy were inevitable. Far more important than correcting the concrete levy was the change to the Temporary Business Energy Support Scheme (TBESS). The scheme, announced on Budget Day, was for tax-compliant businesses that experienced a significant increase in their natural gas and electricity costs. The mishap here was that the announcement confined this support to businesses taxed under “Case I”. This Case I moniker is jargon which not even tax students remark on, as there is no difference between trades and services when calculating profits. It’s a relic inherited from the 19th century, yet it was the term which the Minister for Finance used in his budget speech to exclude professional services businesses from the TBESS. In practice, it would have meant that the high street convenience shop would get some help in paying for the electricity used by the soft drinks cooler, but the doctors’ surgery next door would get no help to pay for the electricity used by the vaccine refrigerator. Official Ireland has long been suspicious of the services industry when it comes to business supports and tax incentives. Schemes such as the Employment and Investment Incentive Scheme (EIIS), whereby investors can get a tax deduction to buy into a business, are not available to services companies. Start-up services companies are not eligible for a corporation tax holiday, but trading and manufacturing companies are. Owner-managed trading and manufacturing companies are allowed to retain profits to reinvest, but profits retained by owner-managed services companies are subject to a corporation tax surcharge. More troubling, however, is the idea that services are in some way inferior to the more traditional trading and manufacturing activities. Such an idea does not make for good policy. The category of “professional, scientific & technical activities” accounts for over 10 per cent of all taxes collected, and 20 per cent of all self-employed income tax and universal social charge, according to recent figures from Revenue. That’s a big sector to overlook when it comes to providing state supports, yet that was the original premise of the budget statement. It has now been corrected in the Finance Bill. Perhaps the real surprise was that TBESS overlooked the services sector in the first place. An important policy aspect of the pandemic supports like the EWSS and the pandemic unemployment payment was that they were agnostic as to the nature and size of the business being helped, where it was located or its legal form. Companies, partnerships and the self-employed were all treated the same way. While ‘trickle-down’ economic policy is increasingly discredited by no less a person than the American president, a ‘rising tide’ economic policy which attempts to support all industries in equal measure seems to have something going for it. In this country it may help explain the remarkable fact that the nation does not have to borrow to provide the cost-of-living supports promised in the budget. If trades, manufacturing and services are now receiving equivalent policy treatment in the budget and Finance Bill mix, the missing piece is the private residential sector. There were modifications to the tax rules for landlords and tenants in the bill, but they don’t go far enough. A change to the way rental income is taxed to reflect all of the business circumstances of landlords and not just their rental business would help keep smaller investors in the market. A system of tax debt warehousing for builders – like the system in operation during the pandemic – to defer Vat and PAYE bills until houses are completed and sold would make a significant difference to the financing of property development at very little cost to the exchequer. Taken together, the budget and Finance Bill package demonstrates policy maturity and competence. Service business is being accommodated in tax and support policy which too often in the past was restricted to manufacturing, foreign direct investment and exporting activity. The next urgent step is to include the property sector. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

  Chartered Accountants Ireland reacts to Finance Bill  Finance Bill a missed opportunity to keep landlords in the rental market   Commenting Brid Heffernan, Tax & Public Policy Lead said  “The extension of the Temporary Business Energy Support Scheme (TBESS) in today’s Finance Bill will come as a huge relief to “Case 2” professional businesses. Many of these, such as dentists, solicitors, and accountants operate as self-employed individuals. The change ensures that the self-employed receive energy costs supports comparable to other businesses, as was the case with the financial supports provided during the pandemic.  “The professional services sector makes an enormous contribution to the economy in terms of employment, exports and tax contribution. Ensuring that this economic activity is supported is of direct benefit beyond the sector.   “Combined with the extension of the Debt Warehousing Scheme to May 2024 businesses no longer have to imminently face warehoused tax debts along with increasing energy bills. Many more SMEs now have a fighting chance this autumn and winter. Simplicity and efficiency in implementation are, however, going to be absolutely critical in getting the supports to businesses as quickly as possible.”  Missed opportunity to tackle property market challenges    The Institute has long highlighted the need to tackle capacity constraints on the supply side of the Irish economy, for example in rental accommodation, and the legislation in today’s Finance Bill will not help renters find accommodation as landlords are still leaving the market.   “The new tax credit provides some much-needed relief for hard-pressed renters, and the measures announced by the Central Bank just this week, will assist people looking to buy, but where are the measures to improve the supply of accommodation?  “It was a missed opportunity to not use the Finance Bill to incentivise landlords to remain in the rental market. Targeted tax measures should have been introduced to halt this exodus and the omission of such measures will lead to continued hardship for renters.”    

Originally posted on Business Post 27 September 2022.  Paschal Donohoe and Michael McGrath have managed a careful balancing act, but the capacity issues that have caused problems in many sectors remain Like the last two budgets, this one was a response to a crisis. Instead of the pandemic, however, it sought to address a cost of living crisis created largely externally. Introducing significant fiscal initiatives can be tricky, as the UK government has learned in recent days. This Irish budget, however, has a good chance of keeping the national finances stable while improving the lot of most citizens. Paschal Donohoe, the Finance Minister, and Michael McGrath, the Public Expenditure Minister, avoided three potential pitfalls. First of all, the measures they announced should not disrupt the existing tax base. Finance ministers, like doctors, should above all else do no harm. The exchequer is funded primarily by corporate activity, consumer activity and the income tax paid by higher earners. None of the tax measures should disrupt any of these three key sources. In common with individuals, businesses are receiving assistance with spiralling energy costs. While we are often reminded that 50 per cent of the corporation tax yield comes from just 10 companies, it remains the case that 50 per cent of the corporation tax yield comes from the rest of the profitable companies operating in this country. Many of these smaller firms will be a direct beneficiary of the 40 per cent energy cost rebate scheme. The sizeable grants and social welfare payments will go towards sustaining people’s purchasing power and therefore help sustain Vat receipts. Higher energy costs also result in higher Vat yields. When petrol prices jumped from €1.40 per litre to around €1.90 per litre, for example, the government’s share rose by €0.11. The increase in the 20 per cent rate band will directly benefit approximately 1 million taxpayers who will see a greater portion of their income taxed at 20 per cent rather than 40 per cent. This is not so much a relieving measure as a preservation of the status quo, because incomes are also increasing in response to inflationary pressures. The change in the rate band should be seen as preserving and securing the high proportion of income tax paid by higher earners, rather than giving anybody a tax break. Secondly, the government has avoided borrowing for its tax and welfare measures. That’s a good call given that euro interest rates are on the increase, but it is also an important signal to potential investors in this country that the national finances are stable. Avoiding borrowing has only been possible thanks to an exceptional corporation tax yield, but as most of the tax bounce seems to have been diverted to one off measures, applying the budget surplus in this manner is a good use of available funds. Many finance ministers across the world would be envious of the Irish surplus available coming into this budget. Thirdly, while some of the additional welfare payments such as the increase in pensions and unemployed benefit will be permanent fixtures, the ratio of enhanced long-term welfare payments to once of reliefs seems to me to be about right. The gamble here is that the inflationary surge – and in particular the energy costs surge – will be short lived. There is of course no guarantee when, or even if, the pressures will abate and not all prices will ever revert to their pre-2022 levels. The mistake that may have been made in the budget is that much of the budgetary emphasis has been on an ability to purchase rather than on an ability to supply. A lack of capacity is a huge problem in our economy. It is encouraging to see an increase in the number of doctor only medical cards, for example, but it will increase the pressure on GPs. It should be a matter of national pride that our third level system is so accessible and after today even more affordable, but are we investing enough in our universities and colleges? It is also excellent to provide €500 in an annual tax credit for hard-pressed renters, but is the €6.2 billion of funding promised to the Department of Housing, Local Government and Heritage going to improve the supply of accommodation quickly enough? Overall, the government has done a good job. If capacity issues in the economy are addressed with the additional spending, it could even be an exceptional job. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland