Originally posted on Business Post, 2 August 2020.Increases in VAT usually pass the acid test of tax policy – the extraction of the most amount of money with the least amount of complaint.  Compared to an income tax increase, the general population rarely gripes about increases in VAT rates.  Hiking the standard rate of VAT of 21% to 23% in 2012 generated hardly any noise compared to the introduction of USC and the reduction of allowances and credits the previous year.  So will people really notice the VAT decrease of 23% to 21% in the July Jobs Stimulus? VAT is a truly European tax in that the rules are devised in Brussels and then implemented in EU member countries.  It is Brussels that decides that the maximum rate of VAT cannot exceed 25%. .  European rules tell us that a box of teabags is charged 0% VAT, but a cup of tea in a café is charged 13.5% VAT while a tin of iced tea in the supermarket is charged 23% VAT.  There’s little enough any Irish government can do to tinker with the VAT system, except make marginal rate adjustments. VAT is a major contributor to the Irish Exchequer.  In 2019, over €15 billion was collected in net VAT receipts which is more than one quarter of the total tax receipts for that year, yet it is a notoriously blunt instrument of public policy.  No VAT is charged on the clothes of the children whose parents are on social welfare, but no VAT is charged either on the clothes of the children of high earners.  Maybe that’s why governments avoid using it for public policy purposes unless you include the now defunct 9% rate of VAT for the hospitality sector.    So it was all the more surprising that the July stimulus knocked two percentage points off the main VAT rate.  The cost of this measure is €440 million, which is a little less than 10% of the total value of the package.  This estimate for the cost of this six month VAT reduction period is in line with Revenue estimates for good years.  In a moribund economy the Department of Finance seems to expect a spending spree.  Remember too that the 23% rate only applies to about half of the items or services we buy.  The rest are charged at lower rates or are exempt. Outside of the retail sphere, the education sector and the banking sector pay sizeable amounts because their activities are largely VAT exempt.  These sectors cannot recover the VAT they pay on purchases because they don’t charge VAT on their sales.  In the main VAT is therefore a consumption tax ultimately falling on the consumer.  So will the VAT reduction boost sales of clothing, alcohol, electrical and other household goods and luxury foodstuffs which fall into the 23% VAT category?  It might not, even if businesses pass on the VAT rate reduction to their customers.  Despite suggestions otherwise from some political quarters, Minister for Finance Paschal Donohoe was quite clear that the 2% reduction should be passed on to consumers.  That's not going to make a huge difference for many items because the value of a 2% VAT reduction approximates to about €1.60 for every €100 spent.  It only becomes a different story if you go out to buy a big-ticket item like a car, where the VAT saving could perhaps insure it for a year. There is no law obliging traders to reduce their prices because there has been a reduction in the VAT rate.  As long as they charge the correct amount of VAT at the correct time, they can take whatever margin they wish.  Past history however suggests that small VAT reductions like the current 2% reduction tend not to get passed on to consumers.  Part of the rationale when the 9% rate of VAT on hospitality was introduced was that a full 4.5% reduction to the normal 13.5% rate would be visible and palpable and therefore consumers would expect to see the difference.So even if it is passed on, a 2% VAT reduction may be inadequate to drive additional volumes of consumer spending.  In terms of business benefit it might have been better to apply the projected €440 million cost towards reducing the vast amounts of VAT debt currently being warehoused against the day when businesses can finally pay their tax liabilities.  Given that the EU state aid restraints are temporarily lifted, that €440 million could have been targeted, for example, specifically to forgive some of the historical VAT due from the SME sector.  The July Jobs stimulus was good.  Ministers and their officials alike did well to deliver what in effect is a full scale national budget in the space of few weeks.  The purpose and rationale of many of the measures like the extension of the wage subsidy, the extension of the pandemic unemployment payments, and the extinguishing of commercial rates is readily apparent.  The object of this VAT reduction is not as clear. I've never seen a tax reduction I didn't like.  However, many consumers may not notice this tax reduction and many businesses could benefit more from this element of the jobs stimulus if the cost of the VAT reduction was diverted to reducing their current and not their future tax debts.  Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Lucy-Anne O’Sullivan, a trainee Chartered Accountant at KPMG and qualified radiographer, talks about her recent return to the front line at St Vincent’s Hospital, Dublin to help tackle the COVID-19 crisis.How did you arrive at a career in accountancy?It is safe to say that I have taken quite an unconventional route to accountancy. I studied radiography at University College Dublin (UCD) as my undergraduate degree and started working in St Vincent’s University Hospital shortly after. I worked there for two years with a fantastic team and made life-long friends. I was always drawn to the corporate world and wanted to explore this interest further, so I completed a Masters in Management at UCD Michael Smurfit Graduate Business School. It was something totally different and allowed me to explore various aspects of business. This was my steppingstone to KPMG Risk Consulting, where I am currently preparing to sit my CAP 1 exams.You recently returned to the front line. What was that experience like?When the COVID-19 pandemic hit the country earlier this year, I felt compelled to make use of my skills as a radiographer and returned to St Vincent’s. Radiology has had a huge role to play in both the diagnosis and treatment of COVID-19 patients. I am very grateful to have had the opportunity to help out a department that has been under a lot of added pressure.The transition back to the hospital was smooth as I was familiar with St Vincent’s, having worked and trained there before. KPMG was hugely supportive of this move, which I am very thankful for. The first week or two took some getting used to as there were numerous new protocols, but wearing head-to-toe PPE and voluntarily walking into the COVID-19 intensive care unit (ICU) quickly became the new normal. The hospital looked and felt quite different, but I felt quite safe as the protocols in place are very effective. There are enormous backlogs of exams as a result of the lockdown, but it is reassuring to see that these patients are slowly but surely starting to come back to the hospital as it looks a little more normal each day.Describe your typical day at the peak of the COVID-19 crisis.The role of the radiographer is very hands-on and, as a result, there is no scope to shy away from the virus. A standard day involved running to COVID ED (the COVID-19 emergency department) to perform chest X-rays on every query case that arrived into the hospital. Every ICU patient needed a daily chest x-ray to monitor progress and assess new line positioning. Radiographers can be seen running all over the hospital with portable X-ray machines to examine patients on the wards, as well as treating non-COVID-19-related patients in the emergency department. I trained in the Cardiac Catheterisation lab, so I also spent some time there as standard illnesses are still occurring.What lessons will you bring back to your role in Risk Consulting?My lessons are quite simple: people are critical to the success of any team, regardless of the working environment. My time in St Vincent’s was tough at times, but I never had to face it alone and always had the full support of my team. It is incredible to see what you can overcome with the backing of a good team behind you.If you could give the public one piece of advice, what would it be?Don’t get too complacent too quickly, as the virus is still out there. That said, I am as excited as anyone to get back to normal. Also, hand sanitiser is your best friend!

In these challenging times, it is comforting to know that everyone can develop resilience. Dr Eddie Murphy explains how.Nobody can be protected from adversity all their lives. In fact, over-protection can result in poor problem solving and later, poor coping skills in the face of adversity. Recently, I planted a Tree of Hope in the People’s Park in Limerick as a symbol of how hope and brighter days will come after the storms pass. Indeed, some people are like trees in that, having survived the most challenging weather conditions and been tested by adversity, they will grow and endure.In reality, bad things happen. We all have periods of stress, loss, failure or trauma in our lives. But how we respond has a significant impact on our wellbeing. We often cannot choose what happens to us, but in principle, we can choose our attitude to what happens. It isn’t always easy in practice, but one of the most exciting findings from recent research is that resilience, like many other life skills, can be learned.What is resilience?Resilience comes from the Latin word resilio, meaning to jump back. It is increasingly used in everyday language to describe our ability to cope with, and bounce back from, adversity. Some define it as the ability to bend instead of break when under pressure or difficulty, or the ability to persevere and adapt when faced with a challenge. The same skills also make us more open to, and willing to take on, new opportunities. In this way, being resilient is more than just survival; it includes letting go, learning and growing, and finding healthy ways to cope.It’s not rareResearch shows that resilience isn’t a rare quality found in a few extraordinary people. One expert on the subject, Dr Ann Masten, describes it as ‘ordinary magic’, noting that it comes from our everyday capabilities, relationships and resources. She argues that resilience is dynamic and that we can be naturally resilient in some situations, or at some times in our lives, and not others. Each person and each case is different.We can all work on our resilience. We can’t always predict or control what life throws at us, but we can build a range of skills to help us respond flexibly, deal with challenges effectively, recover more quickly, and even learn and grow as a result. It can also lower our risk of depression and anxiety and enable us to age successfully. What’s more, the same skills can help us manage the fear of taking on new opportunities and help us develop in other ways too.Areas of influenceThree areas influence our resilience:our development as a child and  teenager;external factors such as our relationships with others or having a faith; andinternal factors, such as how we choose to interpret events, manage our emotions and regulate our behaviour.Parents and those who work with children can do much to help build the resilience of kids and teenagers. While as adults, we can’t change our childhoods, we can do plenty to develop our resilience within the second and third factors. Indeed, research shows that resilience is developable in adults as well as in children.Building resilience skillsThere is saying, ‘what doesn’t kill us makes us stronger’. Science has shown that it has some truth: experiencing some adversity during our lives does increase our resilience by enabling us to learn ways of coping and identify and engage our support network. It also gives us a sense of mastery over past adversities, which helps us to feel able to cope in the future. We have probably all experienced things as stressful initially, but later find that similar activities no longer phase us. It is important to learn that, through such struggles, our coping skills and resources can be taxed but not overwhelmed.Some psychologists argue that most of us aren’t prepared to face adversity. We, therefore, run the risk of giving up or feeling helpless in the face of difficulty. But by changing the way we think about adversity, we can boost how resilient we are. Based on extensive research, they believe that our capacity for resilience is not fixed or in our genes, nor are there limits to how resilient we can be. I like this, as it allows for hope that we can change.Resilience and relationshipsOne of the critical external sources of resilience is our network, such as family, friends, neighbours, and work colleagues. Taking time to nurture our relationships is a vital part of building resilience. Knowing when we need help and asking for it is an integral part of resilience. In this era of mental health awareness, reaching out and offering support is critical.Members and students can contact CA Support on 01 637 7342 or 086 024 3294, by email at casupport@charteredaccountants.ie or online at www.charteredaccountants.ie/ca-supportDr Eddie Murphy is a clinical psychologist, mental health expert and author. 

Consolidation is the next logical phase for brokerages across the country, according to BXI’s Shay Keane. The time for independent brokers to act, he believes, is now.Selling a business is never a straightforward process. Just putting it on the market can be tricky. After all, how do you alert potential buyers to the fact that your business is up for sale without giving customers and your competition the impression that you might be vulnerable?“Since the beginning of time, we have had markets and exchanges to buy and sell particular types of goods,” says Shay Keane, Managing Partner of BXI, which specialises in introducing and matching buyers and sellers of businesses in the insurance and life broker market. “We have a stock exchange where people can buy and sell shares in companies, but up until now, there has been no place to go for small financial services businesses.”BXI offers independent brokers who are considering selling their businesses a place where they can explore their options, test the market, and know that it is all done in the strictest confidence. “Buyers also need a place where they will find serious sellers,” says Keane. “And that’s what we provide.” That commitment to secrecy and privacy in discussions about buying or selling is one of BXI’s key attributes.Demand for the BXI service is driven by consolidation in the sector. “Ireland has between 1,500 and 2,000 independent brokers,” Keane notes. “The reality is that there are far too many independent brokers. Having up to 2,000 brokers in a country of our size doesn’t make sense.”The traditional business and remuneration model for brokers is creating pressure to consolidate. As Keane explains, the primary payment for a product sale comes in the first and earlier years with recurring income for renewals at a much lower rate. “The problem comes when there is no one left to sell to. Brokers are thus relying on annual remuneration from previous years’ sales. Any drop in new business will put a significant hole in the profit and loss account.”That will be a challenge for life and pensions brokers in the current environment. “The people in the industry are talented entrepreneurs, but COVID-19 is a real problem,” says Keane. “Life and pension products have to be sold while home and motor insurance are bought because both are mandatory. How will COVID-19 affect the numbers of interested buyers of discretionary life products? If you think of COVID-19 as an electric shock to the system, it has left everyone a bit frazzled and dazed. People are asking what it means for their business, and the impacts will be quite serious.”He points out that close to half a million people relied on State support when the wage subsidy is included. “If we have a lot of closures, and I hope we don’t, people will lose their jobs and they might decide to cancel discretionary spend on life and pensions policies. People will be very, very careful about how they spend their money. For a small independent broker who has been happy relying on sales every year, new customer opportunities will be very limited for the next few years, and it will become increasingly difficult to cover costs. That’s a huge issue for the broker community.”Even in circumstances where the business manages to maintain income at pre-COVID-19 levels, that may not be enough. “The challenge comes when the cost base starts to move,” says Keane. “One cost-increasing area is regulation. The Central Bank has been increasing compliance requirements year-on-year for independent brokers since the financial crash of 2008. Pre-crash, we had what was known as a ‘light-touch’ regulatory framework. Post-crash has been a nightmare for a lot of small, independent brokers. To comply with new and changed regulations, they have to hire full-time compliance experts or retain external compliance expertise to look after it for them. This all adds to costs.”Increased regulation has also changed business practice. “The nature of the sales pathway has changed,” Keane notes. “Regulation has made selling slower and more costly. It is all predicated on good intentions by the State, but it means there is a hell of a lot more work to do in the sales process. It slows down the ability to make money. It’s a bit like limiting the speed you can drive at on a motorway; the weight of regulation is placing a drag on business. Brokers need scale to drive at an optimal speed. In any sector where you get uber-regulation, the next stage in the process is consolidation.”According to Keane, hassle and pain can be avoided by selling the business now.The sector also includes a number of accountancy practices, Keane notes. “Many accountancy practices are also independent brokers,” he says. “They enjoyed a gentler form of regulation in their brokerage business for several years. This changed quite substantially last year and they now have to bear the full weight of compliance and regulation. They must ask themselves if the brokerage side of their accounting business is generating enough revenue to justify its continuance.”Accountants will also be advising independent brokers on their next move. “People in financial services tend to be optimistic, resilient individuals. That is the nature of the industry, but they should seriously consider what their next move should be. They will be turning to their accountants and professional advisors for guidance. They need to be comfortable with the idea that selling is not a failure. It is a success and a reward for the hard work put into building the business.”It is about picking the most suitable time to sell, Keane contends. “Globally, scale is key. The bigger players want scale and want it fast, and they are ready to buy. The reality is that there are plenty of people of scale who do not believe there is any organic growth left in the market. If you want to get bigger, you must acquire in today’s market. There are plenty of people with scale and money who will buy now.”But that won’t always be the case. “In 12 months, when the real pain kicks in, the clamour to sell might drive prices down, and the opportunity to take advantage of the natural consolidation phenomenon might be less attractive.”BXI allows brokers to avail of that opportunity. “In Ireland, there is a tendency on the part of people who are considering buying a business to tell everyone about it. The tendency for those selling is to tell nobody. If they are thinking of selling, the general sense is that there must be something wrong. Sellers always keep their mouths shut. We allow them to put their business on the market while retaining their privacy.”BXI is more than an exchange; it also offers the full range of M&A expertise. “M&A is a very time-consuming process and can suck the energy out of a business,” says Keane. “The best thing to do is to get external advice and expertise to manage it. We have the knowledge and experience to do the valuations, chemistry tests, due diligence, and so on. We offer a steady, sure and safe pair of hands to deal with the process.“People are battle-weary,” he continues. “Survival is the current key strategic target. People who came through the last crash have spent the past ten years recovering, battling back, and rebuilding their business. Do they want to spend the next ten years doing that again? The natural order of things is to move on. We have a combination of Irish and overseas buyers who are prepared to buy at fair value. Next year could well be a race to the bottom, so the time to act is now.”For more information, visit www.bxi.ie.(This article is sponsored by BXI.)

Paul McCourt and Fiona Hall consider the possible tax implications of current low asset values and what individuals can do to help protect family finances for the long-term.The COVID-19 outbreak is having a range of effects on families and individuals, with many investors seeing family finances suffer and the value of their assets fall in recent months. An important factor to remember at this point is that when an individual makes a gift, it is the current market value of the asset being gifted that applies for both inheritance tax (IHT) and capital gains tax (CGT) purposes.TrustsThe creation of a trust to hold assets for the benefit of the wider family or dependants has been a long-standing solution for many individuals seeking to pass assets to the next generation. Settling a trust is generally a chargeable IHT event. However, if the settlor’s nil rate band is fully available, individuals can transfer £325,000 of assets into the trust without incurring an IHT liability. This could increase to £650,000 for married couples jointly settling a trust with the availability of two nil rate bands. CGT hold-over relief may also be available so that the gift to trust does not trigger a CGT liability.For those considering using a trust, or who have already established one, now may be the time to gift or sell assets. When assets pass out of the trust to a beneficiary, either by way of an entitlement or an appointment by the trustees, any IHT and CGT liabilities are based on the current market value of the assets passing. Trustees may wish to consider whether the trust continues to meet its objectives and whether it is now appropriate to appoint assets out to trust beneficiaries.Personal giftsGifting an asset to another individual is often a potentially exempt transfer for IHT purposes. As such, if the donor survives for seven years from the date of the gift, it falls out of their IHT estate. However, if the donor does die in this period, the value of the assets gifted at the time the gift was made could become taxable.Where a gift fails the seven-year rule, subject to reliefs and the IHT nil rate band (currently £325,000), IHT could be payable on the gift (by the recipient or the executors) or the value of the estate. Making a gift when asset values are low will mitigate the potential IHT exposure for the individual considering gifting an asset.A gift is treated for CGT as being a disposal of the asset at market value by the donor. This could trigger a capital gain if the value exceeds the allowable cost unless the assets qualify for business assets hold-over relief.When asset values are lower, the likelihood of a gift triggering a gain is reduced, or a gift may give rise to a loss. Care should be taken in generating a loss on gifts, as any losses arising from the disposal of an asset to a connected person can only be set against gains that arise from other disposals to that same person. Capital losses generally carry forward to future years, but not back so timing is vital.Crystallising ‘paper’ lossesIndividuals may consider crystallising a current ‘paper’ or book loss on an investment and repurchasing a similar asset. Any such loss can then be offset against capital gains arising on asset disposals made in the same, or later, tax years. It is important to note, however, that ‘bed and breakfasting’ of shares is often ineffective for tax purposes and particular care is required with transactions conducted personally, via an individual savings account or between spouses.As with any investment decisions, independent investment advice should be sought before proceeding.Exercising share optionsWhere an individual exercises an option to acquire shares in an employer through a non-tax-advantaged share plan, income tax is charged on that exercise on the difference between the market value of the shares at the date of exercise and the amount paid for the shares under the option. If the shares acquired are ‘readily convertible’ (i.e. easy to sell for cash or shares in a subsidiary company) National Insurance contributions will also be due on the exercise of the option.Exercising such options while the value of a company is temporarily reduced could reduce tax liabilities in the longer-term. However, this is clearly a risk-driven investment decision on which independent investment advice should be sought before proceeding. One of the key benefits of holding an option is that it would often be exercised before an exit event (e.g. the sale of the company) so that there is an immediate return of value. In the absence of such an event, the implications of becoming a shareholder in the company, and the risk to the value thereby invested, should be considered carefully.Pensions – lifetime allowanceAn individual whose pension pot was previously above the lifetime allowance of £1,073,100 (and with no protection/enhanced protection) might choose to crystallise pension benefits now while the fund value is reduced to reduce/eliminate the lifetime allowance tax charge.There are many financial, investment and IHT issues to consider carefully before proceeding, but acting now may save tax in the long-term. Action should only be considered as part of overall wealth planning, including advice from an independent financial adviser.Short-term opportunity to achieve long-term goalsThis is a difficult time, but any temporary reduction in asset values may allow clients to pass assets into trust or to the next generation at a lower tax cost than both a year ago and a year from now.Fiona Hall is Principal, Personal Tax, at BDO Northern Ireland.Paul McCourt is Tax Principal at BDO Northern Ireland.

The Temporary Wage Subsidy Scheme is ever evolving in the face of uncertainty, writes Maud Clear.The Temporary Wage Subsidy Scheme (TWSS) was introduced on 26 March 2020. Looking back 20 weeks on, in a world turned upside down by COVID-19, it is fair to say that the Scheme has evolved since its inception. With many businesses facing an uncertain road to recovery, the July Jobs Stimulus package was the next eagerly awaited phase in this evolutionary process.Revenue offered its services to the Department of Finance to pay out the subsidy through real-time reporting tools – an extraordinary move from an institution whose function is to collect tax.While the initial assessment in establishing eligibility was a significant exercise for many employers, Revenue provided consistency and support in their operation of the Scheme.That is until a programme of compliance checks was announced on 23 June for all employers availing of the Scheme. This was an unforeseen turn in the Scheme’s evolution, particularly when Revenue issued guidance on 20 April indicating: “We may in the future, based on risk criteria, review eligibility”.Such a broad stroke approach and the requirement for a response within five days have many employers questioning what is yet to come in the operation of the Scheme.Chartered Accountants Ireland, under the auspices of the CCAB-I, sought an extension to this response time. In response, Revenue may now allow for an extension of the five days where an employer contacts them to explain their difficulty in returning a response within the required timeframe.The announcement of an extension to the TWSS until the end of August came with a warning from the Minister for Finance that “this support cannot last forever”. As the challenges facing employers in re-opening continue to mount, assurance has since been provided by the Minister that the Scheme will not come to “an abrupt end”.  Most employers need the support of the TWSS to get back on their feet. Clarity on how they will get it, and for how long, will be a determining factor in their recovery. It is hoped that the ‘July Jobs’ stimulus package will provide that certainty.Maud Clear is Tax Manager at Chartered Accountants Ireland.

The prospect of an EU-wide digital tax raised its head again in June following developments at the OECD. Peter Vale and Kim Doyle consider if we are now closer to implementation of an EU digital tax across all member states, and the impact on Ireland’s offering.The EU agreed last year to park its digital tax proposals to allow global consensus to be reached through the OECD digital tax discussions.Both the EU and OECD proposals aim to allocate a portion of profits based on the location of consumers, reflecting the increasing value that businesses place on consumer data.In June, the US withdrew from the OECD’s digital tax discussions. This has increased the likelihood that the EU will push ahead with its own proposals.In the short-term, the impasse at OECD level is also likely to see other countries push ahead with unilateral digital tax proposals. Indeed, many EU countries have either implemented or proposed their own digital tax proposals.An EU digital taxThe EU’s original digital tax proposals envisaged a simple 3% turnover-based tax as an interim measure, subject to reaching agreement on a means of allocating profits based on digital activity. Given the complexities involved in arriving at such a means, the risk is that any interim ‘quick fix’, such as a flat turnover-based tax, could potentially become permanent.While countries are free to introduce their own digital tax measures, as several have done, implementation of an EU-wide digital tax regime would require unanimity across all EU member states. The need for unanimity could make it challenging to implement as certain countries, including Ireland, are not in favour of the existing EU digital tax proposals.However, the EU is looking to replace unanimity over tax decisions with a form of “qualified majority voting”. While such a change will itself require unanimity, political factors may lead to the removal of the requirement for unanimity in the future. This could potentially pave the way for easier implementation of EU-wide tax changes.Although the removal of the requirement for unanimity on significant EU tax decisions is some years away, countries are often reluctant to use a veto to block EU tax proposals. Hence the real possibility of an EU-wide digital tax in the short- to medium-term.COVID-19 will also drive countries to seek out additional tax revenues to fund spending, with digital tax from large multinationals likely seen as an easy target.What does it mean for Ireland?In recent years, many multinational companies (MNCs) with substantial operations in Ireland have moved their valuable intellectual property (IP) here. Over time, this would be expected to increase corporation tax revenues in Ireland.A simple 3% tax on the ‘digital’ revenues of large MNCs would increase the effective tax rate of these companies and thus dilute the benefit of our 12.5% corporate tax rate. This would impact low-margin businesses most and from a tax perspective, would make it less attractive to operate from Ireland.While the movement of IP to Ireland should see an increase in our corporate tax revenues, an EU-wide digital tax could see a pull the other way; it may cause some groups to reconsider their Irish presence.However, even if our tax regime becomes relatively less attractive, our 12.5% corporate tax rate may still make Ireland the most compelling location in Europe in which to do business and help us retain key employers.Digital tax optionsThe EU acknowledges that a 3% turnover-based tax is a blunt instrument and that more refined taxation of digital activity is the end goal. The OECD considered other options, which would involve looking at the level of activity in the selling country in determining an appropriate allocation between the selling country and the market jurisdiction. However, it is acknowledged that this is a difficult exercise – one that potentially involves a rewriting of transfer pricing principles – hence the EU proposal to start with a straightforward 3% turnover-based tax.Ideally, there would be agreement at EU level on a more sophisticated and accurate means of profit allocation rather than simply jumping into a turnover-based tax regime. While this might take some time to develop, it could be part of negotiations at EU level given that unanimity is required to implement any digital tax proposals (although countries would remain free to continue to develop their own digital tax regimes, which is far from an ideal scenario). A longer-term solution that reflects the value-added activities taking place in the selling jurisdiction, not merely market jurisdiction factors, would be better for Ireland. It would also encourage more knowledge-based businesses to locate here.Wider impactIf the price of any negotiation on digital tax proposals is that unanimity over tax decisions is removed, there is a longer-term vista of other EU proposals being pushed through. This would include the dreaded Common Consolidated Corporate Tax Base (CCCTB), which would again look to rewrite the rules in terms of the allocation of a group’s profits. Such moves would be bad for a small, open economy such as Ireland with significant profits diverted to larger market jurisdictions diluting the benefit of our 12.5% corporate tax rate.Once again, we are at a critical juncture in terms of global tax rule changes. Developments to date have generally been positive for Ireland. However, it would be dangerous to think that this will continue to be the case. In practice, our options are limited in terms of influencing the direction of changes to the tax landscape. In any future scenario, however, the location of high value-add activities should continue to play a key role in the allocation of a group’s profits. One thing that is not good for Ireland is uncertainty. Groups cannot make robust plans in an uncertain environment. The sooner there is clarity on digital tax changes, the better for Ireland.Ongoing robust corporate tax receipts evidence the generally positive impact that global tax changes have had in Ireland to date, with a movement away from tax havens to jurisdictions with substance. If Ireland can maintain a regime that both encourages and rewards innovation, we will be in the best possible place to emerge relatively unscathed from the latest round of changes.Kim Doyle FCA is Tax Director, Head of Knowledge Centre at Grant Thornton.Peter Vale FCA is Tax Partner, Head of International Tax at Grant Thornton.

The General Court of the European Union’s ruling in the Apple tax case affirms Ireland’s reputation as a suitable location for global establishment, argues Claire Lord.In 2016, the EU Commission decided that two tax rulings issued by the Revenue Commissioners in 1991 and 2007 in favour of Apple Sales International (ASI) and Apple Operations Europe (AOE) constituted unlawful state aid under EU law.ASI and AOE were companies incorporated in Ireland, but not tax-resident in Ireland. The contested tax rulings endorsed the methods used by ASI and AOE to determine the taxable profits in Ireland attributable to the trading activity of their respective Irish branches. The Commission calculated that, through these tax rulings, Ireland had granted Apple €13 billion in unlawful tax benefits, which therefore constituted unlawful state aid.The decision of the Commission was appealed to the General Court of the European Union by both Apple and Ireland.General Court’s decisionThe General Court annulled the Commission’s decision on the basis that the Commission did not succeed in proving that ASI and AOE had been granted a selective economic advantage and, by extension, unlawful state aid.The General Court agreed with the Commission’s approach on some fundamental legal issues such as how the principles of advantage and selectivity are to be assessed, the reference framework of Irish tax law and, in broad terms, the application of the ‘arm’s length’ principle. However, it also held against the Commission on several points of law and fact. In particular, it rejected the Commission’s primary argument that the Revenue Commissioners had granted ASI and AOE an advantage by not allocating the Apple group’s intellectual property licences held by ASI and AOE, and the associated sales income, to the Irish branches of ASI and AOE.The Commission had made this argument by effectively contending that such an allocation must be the case because ASI and AOE had no employees anywhere else, despite their boards conducting business outside of Ireland. The General Court found that approach to be wrong in law and fact. It held that as a matter of law, the Commission had to show that, in fact, the Irish branches of AOE and ASI carried out the taxable activity; it was not enough to contend that the Commission had not found such activity elsewhere.In addition, the General Court held that the evidence given by ASI and AOE demonstrated that the relevant taxable activities were not in fact carried out by the Irish branches.The General Court also held that the Commission did not demonstrate that methodological errors (which the Court accepted had occurred in the contested tax rulings) resulted in an advantage for AOE and ASI. While the General Court regretted the incomplete and sometimes inconsistent nature of the contested Irish tax rulings, those infirmities did not, in themselves, prove the existence of a selective advantage. Therefore, such errors did not constitute unlawful state aid.Lastly, the Court also found that the Commission did not prove that the contested tax rulings were the result of discretion exercised by the Revenue Commissioners, which had granted a selective advantage to ASI and AOE. Instead, it found that the correct analysis of 11 other rulings by the Revenue Commissioners was that the approach depended on the facts and this was not objectionable.The Commission may appeal the decision to the EU’s Court of Justice before 26 September. However, an appeal is only on points of law and not on findings of fact.The impact of the decisionThe General Court’s decision is a victory for the position argued by Apple and Ireland. Because it holds against the Commission on several points of law and fact, it will be a difficult decision to appeal successfully should the Commission decide to do so. Also, the points won by the Commission are points of law. They, therefore, may themselves be challenged in any cross-appeal and an adverse decision on any of those points could have systemic effects, which the Commission would not welcome.The decision is obviously newsworthy because of the parties involved, the value at stake and the current global focus on international tax, particularly in relation to multinationals and the digital economy. However, it is noteworthy that many of the points at issue are no longer of relevance for companies doing business in Ireland as the structures and approaches at the heart of the case have not been widely used here in recent years.It does, however, clarify that Ireland did not apply any selective treatment to Apple. It underscores Ireland’s reputation as a straightforward and rules-based jurisdiction which remains an eminently suitable location for global companies to establish significant operations.Claire Lord is a Corporate Partner and Head of Governance and Compliance at Mason Hayes & Curran.

Michael Cawley has enjoyed a stellar career. In this article, he shares his five favourite lessons in leadership.Over the past four decades, I have encountered some very impressive leaders in my professional life. From Coopers & Lybrand, where I trained to qualify as a Chartered Accountant, to Ryanair, where I worked as Deputy Chief Executive, I have seen many different types of successful leadership.However, the best leaders have all had several traits and characteristics in common. In this article, I discuss the five things great leaders do consistently. The best part about these five tips is that they are all doable with some thought and a little effort. There’s no magic and no secret sauce, but great leadership does require purposeful application.Present a clear missionBusiness isn’t rocket science but all too often, simple things become unnecessarily complicated. It is the job of the leader to simplify wherever possible, by establishing straightforward reporting lines and setting clear objectives. In doing so, your team will be better able to see their impact on the overall mission of the business. This is important as colleagues who can directly relate their efforts to business outcomes will ultimately raise their game to go above and beyond what is required of them. If you have a team of people working on this basis, the sky is the limit.It all begins with clarity, however, and that begins at the top of the organisation. An organisation’s leaders must understand the mission and communicate unambiguously to everyone – no fudge, equivocation or misunderstanding. Joe Schmidt often speaks about how great teams exceed the potential of their constituent parts, and the same applies in business. Be clear about what is required, get everyone pulling in the same direction, and your business’s performance will dramatically improve.Think beyond the possibleIn my view, we all achieve a small percentage of our potential, but good leaders help people see beyond the constraints and what they define as ‘possible’. As an example, in Ryanair we faced a seemingly insoluble issue in Italy some years ago. The airline’s schedule requires that the turnaround time at each airport for each aircraft is 25 minutes. To achieve this, Ryanair needs to refuel the aircraft while passengers disembark and baggage is removed. However, in Italy, uniquely in Europe, the law prevented airlines from fuelling the aircraft as passengers disembarked. Our punctuality in Italy was badly affected by this restriction and when every other option was exhausted, my colleague, the Director of Operations, was charged with the seemingly impossible task of getting the legislation changed.Initially, we all thought this was impossible but faced with no alternative, we developed an innovative strategy which convinced the Italian government of the merits of our case. This involved working at both local and national level at speed throughout Italy.This ability to challenge people so that they tackle issues that appear to be beyond them, but not so far beyond them to put them into a state of despair, is a delicate act – but if done right, can make the seemingly impossible, achievable.Develop self-confidenceLeadership can be a lonely place, particularly when you are the CEO. All leaders therefore need the self-confidence to see them through – not only during the tough times, but also day-to-day. Unfortunately, Irish people tend to harbour a high degree of self-doubt and this can lead to paralysis at the very moment decisiveness and action is required. But how can you build self-confidence as a seasoned professional? Success breeds confidence, and I am a big believer in excellence in basic execution. Too many people give up early – they hit a bump in the road and the journey ends there and then. Some people are also just waiting for you to fail. But if you obsess over the basics and execute brilliantly every single time, your chance of success will increase exponentially – and every little win will add to your confidence and self-belief.You also need to develop a relentless streak, because sometimes even excellent execution will not cut it the first or second time around. Michael O’Leary is a good example of this approach with his unwavering persistence and focus on the end goal. So, begin with the basics, execute brilliantly, and do not give up.Be paranoidTo become, and remain, successful in business, you cannot rest on your laurels. Andrew Grove, the founder of Intel who is famously quoted as saying “only the paranoid survive”, insisted that Intel double the capacity of their microchip every two years in order to stay ahead of the competition. He saw this as key to remaining number one in their sector.The truth is, once you or your business become a success, people are out to get you. Your competitors work night and day to catch up with you, so you need to work even harder to stay ahead. This paranoia isn’t the debilitating kind, however. It drives you to become better and see evolution and change as standard practice.Ryanair floated in 1997, and our grand finale on the investor roadshow was in New York. At the time, we could produce a seat for a fraction of the cost of our nearest competitor and investors jumped on the opportunity. The offering was 19 times oversubscribed but instead of thinking we’d made it, we knew that we had to continue to work hard to keep driving our costs down. Today, a number of airlines have a similar cost base to what Ryanair had in 1997, but we have moved on because we knew we had to. We still have the lowest cost base in Europe by far, which is the key competitive advantage when you are in the short-haul air travel business. This type of paranoia is driven by the realisation that, because you are a success, you inevitably become a target for your competitors and you must be at least one step ahead at all times.Booking.com is another prime example of this phenomenon. The company is valued at $70 billion and run by a formidable bunch of people. Every year, they make up to 10,000 changes to their website – most of which are so minute as to be virtually undetectable. But they continuously work to test and iterate based on what customers respond to – and in that way stay ahead of the competition.It’s all very well being paranoid, but how do you stay ahead as an individual? You must learn continuously and be acutely aware of the fact that you do not have a monopoly on wisdom. I am 66 years of age and I am still conscious of my shortcomings. To overcome them, I read and research continuously.Energy and enthusiasmAs a leader, you set the tone – and this is most apparent when it comes to your energy and enthusiasm. Your colleagues at all levels of the organisation will pick up on everything from the urgency with which issues are dealt with and the speed of your commitments to your body language and your choices. Energy and enthusiasm flow downhill, as does lethargy and tardiness, so you need to ensure that, as a leader, you are sending the right signals to your people. And although it may be more challenging to do in a remote working environment, it’s still possible if you adapt.The best time to test for energy and enthusiasm is at the hiring stage. Employ people with as much, if not more, enthusiasm than you. Look for people with integrity and honesty, who seek to say and do the right thing even when it isn’t what you want to hear.No amount of talent can make up for a poor attitude, so be careful in your hiring processes and set the bar high in your day-to-day work environment.Michael Cawley FCA is an independent non-executive director and former Deputy Chief Executive Officer at Ryanair.

Sean Quigley explains how team coaching can help companies achieve the ultimate competitive advantage.Research tells us that at best, 20% of leadership teams are high-performing. It also tells us that at least 50% of teams are underperforming. These statistics should be of interest to anyone in a leadership role, as they have huge implications for business performance, the delivery of public services and a wide range of organisations, including not-for-profits.Every organisation is increasingly reliant on greater teamwork to cope with growing challenges, greater complexity, and uncertain environments. The COVID-19 pandemic has just added a new level of challenge. The need for collective leadership and collaborative ways of working across organisational and sectoral boundaries has never been greater. However, teamwork remains the one sustainable advantage that has been largely untapped in most organisations. There is a great need to help teams develop ways of working so that they achieve more than the sum of their parts. The message is clear: senior leaders must get out of their silos and work with each other more. To navigate today’s constantly changing business environment and address cross-disciplinary challenges, top leaders must act as one and be role models for their organisations.In my experience, both as a team coach and a member of senior leadership teams, there are many reasons – some of which are potentially complex – why teams underperform. However, leaders need to recognise the key areas that lead to underperformance.All teams can improve performance. Imagine the impact of a 10% improvement in the performance of your team, and the consequent benefits for customers and all stakeholders? Team leaders need support and guidance to identify areas where their team is underperforming, and to get to the next level of performance. That is where team coaching can have an immediate impact.High-performing teamsA high-performing team achieves outstanding performance by making optimal use of the capabilities of each team member. This highlights the difference between a team and a group. The members of a team are committed, close-knit and share a common objective.Highly effective teams avoid wasting time talking about the wrong issues and revisiting the same topics repeatedly because of a lack of buy-in. Highly effective teams also make higher-quality decisions and accomplish more in less time and with less distraction and frustration. If some of the 80% of teams that are not high-performing did indeed improve their performance, this would represent a huge opportunity to unleash untapped potential and add value.High-performing teams are not only important at the top of the organisation. Today, teams are widely used in the form of project teams and cross-functional teams, for example. There is an inherent flaw in this enthusiastic shift to forming teams, based on the assumption that team members naturally know how to collaborate effectively.To take a sporting analogy, teams know that they must be greater than the sum of their constituent parts. There are some outstanding examples of this. The New Zealand rugby team, the European Ryder Cup teams and the Irish women’s hockey team, which reached the Hockey World Cup final in 2018. As Babe Ruth famously said, “The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime”.This also applies to business teams and it is noteworthy that Peter Hawkins, a leading expert in leadership team coaching, found that in 40 years working with leadership teams, the average intelligence of the individual team members was over 120. However, the collective intelligence of the team as a whole was about 60. This is a significant challenge for many businesses and organisations that recruit or promote the brightest and best, yet struggle to operate effectively as a team. Indeed, many organisations have excellent development programmes for individual managers and leaders. Yet, it is rare to find organisations with programmes focused on integrating those individual programmes with team development programmes. This is a major blind spot.How can team coaching help?Unlike some other team interventions, team coaching is designed to work with teams for lasting change. Team coaching is a true partnership designed to work flexibly with the team for a period of time so that a higher level of team performance and a deeper sense of cohesion can be sustained into the future. Team coaching isn’t just about helping the team optimise the way it communicates and learns together (the work of a group). It also enables the team to define and execute its collective task in a way that creates greater value than is possible from the sum of the individual members. It is a process of empowering your team to find and implement their own solutions. The team coach facilitates this learning journey and supports the team in developing the skills needed to maximise their collective potential. The team coach will bring your team through a tried and tested process to identify where they are and what they need to do to be genuinely high-performing.Teamwork comes down to mastering a set of behaviours that are in theory quite straightforward, but can be challenging to put into practice day after day. However, when all team members know what those behaviours are and commit to putting them into practice, that is a crucial step towards becoming a high-performing team. The team coach can help the team improve performance and add value by ensuring that:the team has a clear, collective and compelling purpose with agreed objectives;these are aligned to the needs of stakeholders; andthey all recognise that this can only be achieved through effective team collaboration.Every team member must take responsibility for their part, as well as for the functioning of the whole team. They must present their collective purpose and objectives to a wide range of external stakeholders. It is also essential that it is a learning team, where members are jointly and individually developing and adapting to the ever-increasing speed of change.The five dysfunctions of a teamIn the book by Patrick Lencioni, The Five Dysfunctions of a Team, he says that “organisations fail to achieve teamwork because they unknowingly fall prey to five natural but dangerous pitfalls”. In his book, he describes the five dysfunctions that are pervasive in all kinds of organisation. By identifying the dysfunctions by name, leaders can watch out for them and learn to address the root causes that prevent teams from reaching their full potential. The five dysfunctions are outlined in Figure 1.Based on the indicators, does your team exhibit any of the characteristics of a dysfunctional team? Would you prefer your team to have the features of a high-performing team? If your team is ready to work hard, take responsibility for results and achieve its potential, now is the time to take action. Working with a qualified team coach can help your teams make the transition quite quickly.Sean Quigley FCA is an executive and team coach, and non-executive director.

Julia Rowan offers practical guidance to help leaders run productive and enjoyable team meetings.Team meetings both reflect and create a team’s culture. In times of uncertainty, they provide an essential lifeline to staff as well as an opportunity for leaders to develop the future team that they need.But before we dive into the detail, bear with me for a short and useful exercise: write down a few words that describe your team. Next, fast-forward 12 months: write down the words you would like to use to describe your team. What did you write? More strategic? More independent? More collegiate? More thorough? More proactive? Now reflect on this: how are you using your team meetings to build that strategic, independent, proactive (insert your own words) team that you want?Leaders rarely view the team meeting as an opportunity to build the team they want. Team meetings are seen as a duty, not an opportunity.Create a strong centre of gravityLeadership is challenging, both in good times and bad, but the challenges are different. Right now, there is significant uncertainty: possible recession, business continuity challenges, staff safety and more. Organisations are trying to recruit, induct, delegate, manage and lead at a distance. Many team members are anxious.All of this, to be slightly controversial, in an environment where commitment to one’s profession can be more important than commitment to one’s employer. And that commitment is neither right nor wrong – it merely reflects the reality that all professionals need to stay accredited. Otherwise, their employment prospects are gone. But it all feeds into the need for the leader to create a strong ‘centre of gravity’ within the team and to make the most of the opportunity (there’s that word again) that team meetings offer.Let’s go back to our opening exercise. Let’s say that you want your team to be more proactive; you have two choices. You either tell them that you want them to be more proactive or, at your next team meeting, you ask each team member to give an example of their proactivity and how it worked out. The first option sits nicely under ‘good advice’, and like all good advice, it may or may not be heeded. The second option sends a powerful message: that members of this team are encouraged to be proactive.The purpose of team meetingsMy take on leadership is that it happens through a series of conversations, most of which are one-to-one – interview, induction, goal-setting, delegation, feedback, performance management, coaching etc. Each of these conversations has a specific purpose and opportunity. Team meetings are different and serve three main purposes:they allow for the exchange of information, ensuring that everyone is on the same page;they facilitate discussion, which leads to better quality decisions; andthey are usually the only time and place where the team is together and can ‘do’ being a team. They are the equivalent of the family dinner – a time to stay connected, support each other and, yes, have the odd spat.The team-building part builds the trust needed to ensure that the discussion and decision-making are high-quality; that all team members can speak up, air opinions and be heard. This, in turn, feeds into that all-important engagement and commitment to the team, which is particularly important when teams work off-site or virtually.Plan and run outstanding meetingsTaking the time to plan and run outstanding meetings is tough on leaders who are already under pressure. They may unwittingly adopt a ‘tick-box’ approach to their meetings: regular meeting? Agenda circulated? All in attendance? All updates covered? Action list distributed?Actually, if you are doing all of that, take a bow because many teams never meet (and hopefully the thoughts below will help you make your meetings even more useful and enjoyable). Or maybe you used to run meetings and then stopped. They took too long, nobody spoke up, or the same few people dominated. Now is a great time to reinvest in your team meetings.The tips that follow may help stimulate some creative thoughts about how you plan and organise your team meetings. Julia Rowan is Founder of PerformanceMatters.ie. Following a career that spanned finance, marketing and public affairs, Julia now works with leaders and teams throughout Europe to build strong teams.

With remote working here to stay, people leaders will need to understand the nuances of managing virtual teams and remote workers. Dr Annette Clancy explains.COVID-19 propelled remote working to the top of the agenda for every business. Overnight, virtual meetings replaced face-to-face interaction and have become the primary way in which work is conducted. This temporary solution to a once-in-a-lifetime pandemic is tolerable because we are in such unusual circumstances.However, some organisations such as Facebook and Twitter are now planning for permanent remote working. We are also likely to see remote working becoming more popular in non-technology businesses. For some people, and some businesses, remote working works. The ability to manage remote teams effectively will therefore be a critical skill in the new working world.What differentiates virtual teams from face-to-face teams? And what skills will managers need to ensure that remote working continues to work into the future?RelationshipsSustaining relationships in virtual teams is always a challenge due to the solitary nature of remote work. Research tells us that members of virtual teams have different ways of engaging with the team; not every member will engage and disengage at the same time. Also, people are coping with different types of emotions. We have seen, during the pandemic, how anxiety has taken hold and people have found it difficult to think. Managers of virtual teams must be attuned to these variances and work hard to help virtual team members generate a sense of belonging, which won’t naturally occur because members cannot meet in person or socially.TrustTrust is a critical issue for remote workers. Can you trust somebody if you have never met them? Recent research (2019) by Breuer, Hüffmeier, Hibben and Hertel tells us that trust is more important for virtual teams than face-to-face teams. The research identifies the factors most relevant for building trust in virtual teams. They are:abilitybenevolencepredictabilityintegritytransparencyThe authors offer some practical solutions to help with trust-building. These include creating a database listing team members’ expertise; providing more information about their ability; online profiles; information in email signatures; and online feedback systems and other processes designed to increase trust and encourage closer cooperation between virtual colleagues.Flexible workingFlexible working arrangements are at the heart of remote working, but this can be challenging for managers who have the job of coordination. In an article published in 2007, researchers Dyne, Kossek and Lobel suggest that collaborative time management processes can be ‘designed in’ from the start. Furthermore, employees can be asked to engage in ‘proactive availability’ where each employee is asked to take responsibility for identifying difficulties and notifying others on the team. For example, if a team member’s existing caring responsibility clashes with a meeting, they tell another team member and send questions/comments in advance to the meeting. In this way, time management and scheduling are organised within the team rather than by the manager.MotivationThe researchers also recommend ways in which managers can bolster motivation. Instead of focusing on how often people are present and available (i.e. virtually present and on camera), they suggest nominating specific events that occur at pre-determined times. Focusing on these events creates more flexibility, particularly for part-time workers, and re-orientates energy on outputs rather than on inputs. This, in turn, is likely to increase motivation and keep people focused on the bigger picture as opposed to who is absent from virtual meetings.Remote working is here to stay, and businesses that offer this flexibility will need to have managers who understand the nuances of managing virtual teams and remote workers. Managing people you have never met is enormously challenging, but there are big rewards for businesses in accommodating how people want to organise their work-life balance.Dr Annette Clancy is Assistant Professor of Management at the School of Art History and Cultural Policy at UCD.