Originally posted on the Business Post, 10 May 2020   The phrase “in these uncertain times” can't disappear fast enough from our public discourse and commentary.  The extent of the uncertainty, be it in our business, personal or social lives, is compounding the discomfort of the lockdown.  This week's news that talks had finally commenced on a programme for government should be dispelling some of the uncertainty, but can any of the three players, Fine Gael, Fianna Fail and the Greens, win acceptance for such a coalition? Even arriving at an agreed programme for government is in real doubt.  The recurring mantra of the putative minor party in government, the Greens, is that any programme for government has to signal a 7% reduction in carbon emissions annually.  Nothing illustrates just how tall an order that is than, even with the reduction in economic activity, travel and fuel consumption because of the Coronovirus lockdown, that 7% target won’t be met this year. According to recent research by Carbon Brief, a publication which focuses on climate science, the estimated global carbon reduction in 2020 thanks to the worldwide pandemic lockdown will only be 5.5%.  This particular estimate might not be entirely agenda free, as Carbon Brief is supported by a group called the European Climate Foundation whose aims are to promote policies to reduce greenhouse gas emissions.  Separately however, the International Energy Agency's latest numbers project that emissions will have dropped by 8% by the end of the year.  This agency, originally established to secure oil supplies for some OECD member nations including Ireland, also points out that the lockdown effect is six times larger than that caused by the great recession in 2009.  It seems that the crippling misery of the lockdown is only achieving the same scale of reduction in carbon emissions that the Green Party is insisting we achieve each year.  To be fair to the Green Party and their supporters, their general election manifesto was clear in its target of achieving a 7% reduction in annual emissions for the next decade.  The Green Party manifesto had plenty of ideas for what needed to be done to achieve that, and even some ideas for how the associated costs could be met.  Their taxation suggestions were derived from old proposals and the manifesto offered little indication of how much additional tax might be collected to fund reform of the way we care for the environment. The Green manifesto asked for a financial transactions tax, seemingly oblivious to the havoc it wreaked on the stock exchange of one European country that did introduce one, Sweden, in the 1980s.  They want to reduce VAT on products and services linked with energy conservation, but that would require a change by the European Commission to the VAT Directive and is not within the gift of an Irish government.  They raise the old chestnut of a wealth tax on individuals holding assets over €10 million but without saying what the rate might be let alone how much it might bring in.  They want Ireland to support the OECD processes for global corporate tax form, even though Ireland has been among the earliest adopters of those change proposals.  No political party manifestoes for the last general election remain relevant because none of them were drawn up at the time of a pandemic.  The Green proposals to fund environmental initiatives are particularly problematic.  They weren’t coherent even at the time of their drafting, yet their greenhouse gas emission reduction target remains a red line for their participation in government.  What are they actually proposing to meet the cost of developing alternatives to our current patterns of energy generation, storage, transportation and consumption to reach this target?  Their manifesto proposals won’t do it. A new government is urgently required to ensure we can continue to bailout our damaged businesses and support the unemployed.  It is right to fear global warming.  It is right to be terrified of coronavirus and its impact on our people, our healthcare workers and our communities.  But the country cannot continue to deal with either crisis without having a reasonable economic footing.  We can neither tax nor borrow our way both to economic recovery and to a 7% greenhouse gas emission reduction target within a year or two.  Thanks to the pandemic, it may not even be possible within the lifetime of one government. All over the country, in every walk of life, totems are being knocked down.  In the space of a few weeks, we have re-engineered how our public services are delivered, how we shop, how we educate and assess student achievement.  Many businesses have re-imagined their business model and are still trading, often online, using courier deliveries and with people working from home.  Our politicians involved in government formation talks must now also re-engineer the attitudes of their parties and supporters.  Unless they do, there will be no certainty of success in government formation talks.  The time for red lines, and green lines, is past. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

How can charities, especially smaller ones, deal with the many challenges they are currently facing? Kathya Rouse identifies key areas where accountants may be needed to help charity clients. Like everyone else, charities are struggling to come to terms with their new normal. The unprecedented situation we find ourselves in, and uncertainty around the short-term outlook, makes planning for the future exceptionally difficult. Some charities are continuing to provide ongoing services, while other charities are operating limited or no services due to the current government restrictions. It seems likely that some level of social distancing will be in place for some time and many charities will need to come up with new ways to continue/recommence providing their services while adhering to the relevant government restrictions. Amid all this uncertainty, how can we, as accountants, help? Many smaller charities do not have the expertise among staff or trustees to deal with many of the challenges they are being faced with. We are more than “just” accountants to these clients – we are their trusted business advisors who can be relied on to provide independent advice. I have identified a few areas where you may be needed to help your charity clients: Provide a sounding board and listen to their concerns Despite many similarities between charities, each one will have different requirements right now, so aim to provide a bespoke solution for each charity.   Encourage them to develop a contingency plan to guide them through planning for their organisation during the life cycle of the current pandemic There are various free templates and guidance issued by some of the main charity sector support organisations, such as The Wheel and The Carmichael Centre, which you can direct clients to. The contingency plan should be a live document which remains under regular review. Advise charities around their governance requirements and their AGM There is conflicting advice around whether AGMs can be held entirely virtually under company law except where specifically allowed by the company’s constitution. You can play a key role in helping the charity figure out its position re quorum and use of proxies to overcome this hurdle. Get involved in the budgeting process Budgeting has never been more important, and you can provide your expertise through assisting in, or reviewing, the budgeting process. Like the contingency plan, the budget should also be a live document updated regularly. Empower the trustees Empower the charity trustees to make decisions around whether they can use their current accumulated reserves to make up for a temporary deficiency in resources by assisting them to ascertain their restricted and unrestricted funds. Stay up-to-date Ensure you stay on top of the various funding streams available to charities, such as the Temporary Wage Subsidy Scheme and the new €40 million COVID-19 support fund, and make sure to keep your clients abreast of any available funding. Keep up to date with ongoing regulatory, professional and other guidance which may be of use to your clients. Chartered Accountants Ireland have collated a list of various guidance documents which are available on its website and is open to everyone, not just members. Make use of any reputable free resources available to you and your clients. Kathya Rouse is a Partner at McMoreland Duffy Rouse and a CA Support Board member.

How can charity trustees continue to safeguard charities during this tumultuous period? Michael Wickham Moriarty gives us three top tips on how to safely guide your charity through these uncertain times. The COVID-19 crisis has now been impacting Irish charities for at least two months. What should charity trustees be doing for their charities now and for the future? Keep meeting, but be flexible Board and committee meeting schedules may have been disrupted, or even paused, during the introduction of restrictions in March and April. This is entirely reasonably as management focused on facilitating remote working and core business continuity during the initial stages of the crisis. If meetings have been on hold, look to restart them now. All the governance functions of charity trustees are just as important during this crisis as they are during normal times. Undoubtedly, the agendas and board calendars will need to shift to focus on business continuity, crisis management and other COVID-19 related risks. All meetings should be remote rather than in-person. They may take place at different times to facilitate either board or management. Some meetings for board and committees may be called at short notice as the charity responds to a rapidly changing situation. The papers prepared by management may be less polished and punctual as the executive team focuses on crisis response. Going forward, charity trustees should continue to meet and focus on their core governance roles of strategic direction, oversight and risk management. Think of all stakeholders Given the serious impact of COVID-19, management may focus their energies and attention on specific stakeholders or critical areas. Charity trustees should ensure that all stakeholders are considered during the crisis. For example, the management team may be focused on serving and protecting their vulnerable beneficiaries without giving sufficient attention to staff welfare, including their own. In many charities, the funding and financial crises could take all the attention away from the critical work of the organisation. Institutional donors are a stakeholder that can dominate the attention of charities, but many of these funders are currently being flexible with their grants, allowing charities to focus on other stakeholders. Trustees should ensure due consideration is given to the needs of all stakeholders, as well as organisational sustainability. Be a critical friend to management Most charities are dealing with multiple complex risks with a high-level of uncertainty over the future operating context for funding, staff and beneficiaries. This level of uncertainty is likely to persist for the remainder of this year and beyond. Charity trustees must always balance their relationship with management between challenge and support. As a trustee, you may have access to networks, expertise and experience not available elsewhere within the charity. Use this information to test the assumptions that management use for their COVID-19 response plans. Examine the scenarios and decision points set out. This trustee perspective can really add value as you collaborate with management in agreeing how to chart your charity’s path through these unprecedented times. Good luck! Michael Wickham Moriarty FCA is a Governor and Vice-President of the Rotunda Hospital, and he is the Director of Corporate Services of Trócaire.

Originally published in Business Post, 3 May 2020 In common with many revenue authorities across the world, the Revenue Commissioners are being asked to channel government cash supports through the pandemic to the businesses which can claim them.  The job however of Revenue is primarily to collect money, not to pay it.  A tax system cannot be liberal indefinitely. Along with operating the wage subsidy scheme, Revenue have in recent weeks granted moratoriums on tax filing dates and tax payment dates, effectively allowing many smaller businesses to decide for themselves how much tax they are going to pay and when.  This isn't sustainable – somebody has to pay the nurses.  The wage subsidy scheme is time bound to 12 weeks.  There won’t be interest charged on late payments of VAT and PAYE which are due in May from many businesses but we don’t know the position beyond that.  Government will have to clarify if Revenue will be asked to extend these temporary but very useful measures as it outlines its recovery roadmap. Concrete numbers on the impact of the crisis on the economy will be seen in the April Exchequer figures due to be published by the Department of Finance tomorrow.  Most of the tax collected in April typically comes from PAYE income tax on wages paid during the month of March.  Even these figures will only hint at the full story as we already know that the employment situation was worse and the impact of the temporary wage subsidy scheme was far higher during the month of April.  Government has already signalled that the wage subsidy scheme itself could be tapered or finessed beyond the 12 week period already advertised.  Any adjustments could take the form of a blanket extension, or perhaps more effectively by refocusing it on those business sectors where employment is most affected in the crisis.  These sectors include the hospitality sector and the construction sector.  This would be possible because the businesses in those sectors can be readily identified and also because the usual concerns over the EU State Aid rules if tax is being used to favour one industry over another don’t apply.  EU Commissioner Margrethe Vestager, best known perhaps in this country for her fascination with the tax affairs of Apple, last month arranged what in effect is a suspension of many of the usual State Aid rules until the end of this year. The response to the Coronavirus crisis is stress-testing wider issues within the tax system as well. The use of tax havens at a time when governments everywhere are struggling for tax collection has been thrown into focus.  Both the French and the Danish governments are reported as blocking emergency supports and funding to companies registered in tax havens.  The tax residency rules, which determine the taxability of an individual by reference to their location, or the taxability of company by reference to where the directors are located, are also being stretched by the contagion.  The issue of whether non-residents should be taxed has long been contentious here and led a few years ago to the introduction of the domicile levy.  This is a tax on wealthy Irish individuals based on their Irish business interests here as distinct from their presence here.  But is it right to charge taxes on individuals just because their flights have been cancelled?  Revenue have already introduced some temporary pragmatic workarounds solve these problems, but the new normal might well require a more permanent solution. New taxes are often the by-product of crises.  The great recession of 2008 left us with local property tax and the universal social charge.  The global recession in the 1970s saw the introduction of capital gains tax, along with revised approaches to taxing inheritances and brand new rules for companies.  Income tax itself was originally conceived in the UK as a temporary tax to help fund the Napoleonic wars at the turn of the 19th century.  Once a new tax is invented, it tends not to go away. A lasting legacy of the coronavirus pandemic could be some completely different form of tax.  This is difficult to do if only because governments everywhere through the ages have already figured out how to tax most things, leaving little room for new approaches.  Another possibility is the reform of existing taxes towards dealing with the consequences of the pandemic, and there are many precedents for this type of manoeuvre.    One such precedent is the solidarity surcharge in the German system which is an additional fee on income tax, capital gains tax and corporate tax.  The solidarity surcharge is paid by every individual and company and it bolsters up the tax rates by 5.5 percentage points in each case.  It came about to help towards the cost of reunification of that country.  It remains an element of the German tax system almost 30 years after reunification was completed.  Surcharges like this should serve as a further warning to enthusiastic policy makers that it can be very hard to ditch a new tax. As matters stand now however the Irish tax regime has never been more liberal in its administration of income supports, in its relaxation of some traditional rules and in its benign treatment of late payments.  None of these will last.  Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Originally published on Business Post, 26 April 2020 One of the most inane comments I heard about Brexit was from a management guru who said that the Brexit crisis only forced businesses to plan in ways that they should have been doing already.  As being wise after the event goes, this takes some beating.  It's like remarking that falling off a pier should prompt you to consider taking swimming lessons. Yet if Brexit caught some of us unawares, everyone was blind-sided to the prospect of a Covid-19 pandemic.  Even the Minister for Finance could admit this week that a pandemic was not on the critical planning path of his department, while observing that it probably was not on the planning radar of any other finance minister in the world either.  Every business is now though being prompted to reconsider what they do and how they do it. Ironically one of the most compelling prompts is coming from the Revenue Commissioners.  The Wage Subsidy Scheme run by the Revenue is very successful.  Some 300,000 workers are taking home more than they might otherwise take from over 45,000 employers as a result of the scheme.  The scheme received a further boost with last week’s announcement of enhanced subsidies for lower paid workers.  In addition, workers whose pre crisis earnings exceeded €76,000 per annum but who have since suffered pay cuts to bring their earnings below that cut-off threshold may now also be eligible for wage subsidies. While the focus has rightly been on the plight of workers, wage subsidies are of course paid to businesses which in turn pass them on to their employees.  Unlike its UK counterpart (also of course applicable in Northern Ireland) where eligibility is predicated on people being laid off temporarily on “furlough”, eligibility for the Irish temporary wage subsidies is based on a decline in business.  At its simplest and crudest measure, wage subsidy scheme eligibility depends on a fall-off in sales or orders of 25% or more in quarter two of 2020.  That is as against a comparable period, typically quarter two of 2019.  For many of us, that level of fall-off is all too evident.  Nonetheless, not all businesses, though they may be severely challenged by the lockdown, can convincingly estimate a 25% drop-off for quarter two.  That could be because some strands of their operations are continuing to thrive despite the lockdown. Consider for example a wholesale and retail trade.  Retail may have dried up completely because there is no footfall, but the wholesale side of the business continues perhaps with even increased demand for some product lines.  Similarly a training organisation may find that while demand for an attendance at classroom-based sessions has evaporated, its online training offerings are experiencing a surge. The newest version of Revenue guidance addresses the position for such industries, permitting them to identify individual commercial streams within their organisation which are experiencing a 25% drop-off in business.  Employees associated with those elements of the business should be eligible for wage subsidies. When claiming the temporary wage subsidy in accordance with this newer version of guidance, businesses must be able to show that the divisions which are in trouble within the organisation are long established, and in particular had been well established before the pandemic.  Makey-uppy commercial divisions within companies constructed for no reason but to apply for wage subsidies will wither under future Revenue scrutiny. Even if some shop doors are open post 5 May, training venues eventually open their doors, and passenger number restrictions are eased at some point in the future, will there be bodies to buy or to learn or to travel as in the halcyon days of 2019?  That may take a lot longer.  A self-imposed lockdown will remain, not least because the shaking of both personal and industry finances over the past several weeks will have instilled caution.  A newfound and exaggerated prudence will prevail for months to come even after the restrictions are lifted.  The Minister for Finance signalled during the week that the wage subsidy payments could continue in a changed or tapered form beyond their twelve week span which is due to end in June.  This will be necessary and we all now need to look beyond that point.  Those businesses along with the individual divisions within companies and organisations which are currently not eligible for wage subsidies will form the backbone of the recovery.  However, if we do not ensure that support is maintained for the industries most damaged by the Coronavirus crisis, national recovery will be patchy at best.  The level of unemployment, forecast this week by the Department of Finance to reach 220,000 by year end, will remain stubbornly high.  Job retention and restoration – remember that the subsidies can also be claimed for workers who are re-hired - are critical to achieving a rapid recovery.  The Wage Subsidy Scheme is fundamental to ensuring this can be achieved.  It is surely better for the country to subsidise workers’ wages as markets return to normal than to pay dole.  Unlike the last financial crash and unlike Brexit, we can be wise before the event as we resolve the crisis. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland  

Originally publised on Business Post, 19 April 2020 Dear Minister This week you promised to publish a policy response to support the recovery.  You have made the point in the past that while many people have great ideas as to how money should be spent in our economy, few make proposals as to how money might be raised.  In happier times it was relatively straightforward, though never popular, to raise additional taxes.  But that was then and this is now.  In our now crippled economy where industry is already unable to meet existing tax commitments, what type of measure would bring in an additional €1 billion over twelve months?  Income tax increases? Hardly.  A VAT increase?  Possibly.  But even if it did, how far would €1 billion go towards making a difference in our current downturn when €250 million has already been paid out in Wage Subsidy alone?  Whatever else you include in your recovery policy Minister, tax increases should not feature.  Many comparisons have been drawn between the downturn in 2008 and our current crisis, but the current dilemma is fundamentally different.  In the past few weeks industry across the world has been put into a government induced coma to help tackle the pandemic.  Compare that to the last time, caused by a global financial collapse.  Interest rates are now much lower than they were at the time of the last recession, and the EU institutions are creating a pool of cheap money that countries can draw on to rebuild shattered economies.  Compare that to the last time when the Troika came to Dublin because, as a nation, we couldn’t borrow money.  That's not to say that there aren't lessons from the great recession.  You and your officials will be aware that the ballooning of the national debt from 2009 onwards was not primarily due to the bank bailout, but rather to the decisions by the then government to maintain social cohesion by preserving state benefits and public services as best we could until employment levels came back towards more normal and sustainable patterns.  That took seven years of austerity to achieve.  On current evidence we will need to borrow again in 2020, but we must contain the borrowing requirement in future years to avoid a repeat of prolonged austerity. To do this we should look beyond the models generated of traditional economics and also draw guidance from other disciplines.  The key guidance from accountancy is crystal clear - nothing kills a business quicker than a lack of cash flow.  When businesses disappear, the employment they create also disappears.  If we are to secure business recovery and also to provide a reasonable standard of living for the majority of our citizens, jobs have to be restored and preserved as quickly as possible.  The wage subsidy scheme directly correlates jobs with business activity.  Even if the wage subsidy scheme has to be extended beyond the current 12-week period using heavy government borrowing, that might be money very well spent.  Restoring employment and income levels will reduce social welfare demands and boost income tax revenue in the years ahead.  In turn that reduces the future borrowing requirement.  Cash infusions to business will be needed beyond the lifting of Covid-19 restrictions.  Behavioural economics warns that decisions tend to be made in a risk averse way.  People also tend to base their decisions on more recent experience and information even when the experience and information is not objectively correct.  That suggests that there will be considerable hesitancy in the consumer and financial markets for many months to come.  Purchasing and investment patterns comparable to those of 2019 will not return as long as the horror of the disease and the worry of the lockdown remain in people’s minds.  Short of discovering, and widely deploying, a Covid-19 vaccine it may not be possible to change mind-sets quickly.  Even if confidence rapidly returns to our domestic market, it may not return as soon rapidly to our export markets.  Planning on the basis that all will return to normal post lockdown would be too optimistic. More positively, the management of the current crisis may be restoring confidence in public services. Rightly or wrongly, there was increasing scepticism in recent times about the capacity of government and the public service to deliver.  There were high profile examples of questionable financial procurement like rural broadband and the National Children’s Hospital.  However in recent weeks we have seen that the public sector can react quickly and effectively.  There is momentum to carry forward elements of the current response to Covid-19 that think the previously unthinkable - putting more elements of housing, health and insurance directly under public control and flexibly redeploying public servants where they are most needed in service provision, standards maintenance and regulation.  Minister, the actions by you and your colleagues in this government and the next will not be judged by the electorate on immediate outcomes.  They will be judged by reference to the impact on our daily lives in 2021 and 2022 and beyond.  A return to the type of austerity we experienced following the financial collapse is something the Taoiseach has said is to be avoided.  It can be avoided if the national recovery policy maintains the current emphasis on keeping cash in businesses, empowering the public sector and not expecting a return to normal anytime soon.   Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland