"I truly feel badly for the Irish people," David Ehrlich, chief executive of Ires Reit – the Republic's biggest landlord – told The Irish Times when asked about climbing rents last month.
Well, he’s unlikely to have been too cheered as the Government this week moved to introduce rent controls and, following some jostling between Fine Gael and Fianna Fáil on the finer details, the measures look set to become law.
Shares in Ires Reit, which has a portfolio of some 2,377 apartments in Ireland, fell 2.5 per cent to €1.16 in Dublin, following the publication of Minister for Housing Simon Coveney’s plans, which were significantly more impactful than expected.
Under the scheme, landlords who are entitled to a rent review from January will have to limit any rent increase to 4 per cent. About 70 per cent of Ires Reit’s apartments are due a rent review next year.
The measures initially applied only to “rent pressure zones” in Dublin and Cork, but Fianna Fáil strong-armed Mr Coveney to fast-track the examination of a number of areas including Waterford, Limerick, and Galway – to see if they’re also rent pressure zones.
Rising rents have been cited as a major contributor to the State’s homelessness crisis and increasing numbers of repossessions before the courts.
The Master of the High Court this week queried whether AIB’s largest shareholder – the Minister for Finance Michael Noonan – was aware of the extent of its litigation in repossession and debt cases.
Master Edmund Honohan said about half of the 98 cases before him on Tuesday were taken by AIB. Of the bank's cases, most related to substantial debts exceeding €75,000 while 11 concerned possession proceedings.
****
The Republic’s corporate tax practices were once again under the spotlight for all the wrong reasons this week.
The State was branded one of the world’s worst tax havens, on a par with locations with a shadier reputation for helping big business dodge tax, such as Bermuda and the Cayman Islands .
Aid agency Oxfam did not mince its words, placing the Republic sixth in a list of 15 states that facilitate large-scale corporate tax avoidance through profit-shifting, aggressive tax planning structures and so-called sweetheart deals.
The agency’s damning report said collecting tax was one of the key means by which governments are able to address poverty, and that the Republic was part of a toxic global system that services the very wealthiest while ordinary people lose out on essential public services.
Unsurprisingly, the Minister for Finance Michael Noonan was not happy with the allegations. He rejected the report’s contents and dismissed the notion of reputational damage to the State, deeming the findings “so wide from what the actual factual position is”.
The Department of Finance, for its part, said the State “does not meet any of the international standards for being considered a tax haven” and is “fully compliant” with all international best practices in the areas of tax transparency.
The European Union is advancing plans to introduce a common consolidated corporate tax base (CCCTB) across Europe, which would allow companies to submit one centralised tax return across all EU countries in which they operate.
Their taxable profits would then be split between the relevant member states.
UCC economist Seamus Coffey appeared before an Oireachtas finance committee to say the CCCTB poses a major threat to the Irish economy.
He said it was not “unduly pessimistic that Ireland could lose up to 50 per cent of its current corporation tax base”.
Separately, Dublin was ranked in third place in a list of the top cities in the world for attracting foreign direct investment (FDI). It displaced Hong Kong to move up one place in fDi magazine's "global cities of the future" rankings. It placed third for both economic potential and business friendliness.
****
Tax woes aside, the Economic and Social Research Institute (ESRI) had some more favourable news for the Government in its analysis of October’s budget.
It said Mr Noonan’s measures delivered modest gains to most households with those on lower incomes faring marginally better.
The modest gains from the various measures amounted to a 0.25 per cent hike in aggregate household disposable income.
On average, it was “most favourable” to the 10 per cent of households with the lowest incomes, which gained more than 1 per cent.
However, in a separate report, the ESRI warned that the scope to spend money in future budgets is under threat as the economy runs the risk of overheating next year on the back of a spike in residential construction.
The significant upturn in house-building in recent months means up to 18,000 units will be built next year, significantly more than previously forecast. The ESRI said the economy was straying dangerously close to overcapacity.
This would potentially drive up wages and prices which could, in turn, lead to a loss in competitiveness and derail the Government’s future spending and tax plans.
The ESRI also revised down its main growth forecasts for the economy, with gross domestic product (GDP) now expected to expand 4.2 per cent this year and by 3.5 per cent in 2017.
Employers’ group Ibec was also a bit worried about the economy, predicting it will grow at its slowest pace in three years – 2.8 per cent – during 2017.
The lobby group also downgraded its GDP growth forecast for this year to 3.7 per cent, compared to 3.9 per cent previously.
Despite all that, the State has come a long way, although possibly in a slightly uneven fashion. A new survey from Aviva revealed that it is young men living in Dublin that have benefited the most from the economic recovery, with older women living in Connacht/Ulster faring the worst.
Fewer than one in five people said the economic recovery had benefited them, with just 3 per cent “agreeing strongly” that it had been of benefit. More than half said they have not benefited.
There was, meanwhile, some potentially good news for the economy as the US dollar climbed to the highest level since 2003 against the euro after the Federal Reserve’s first interest rate hike of 2016 came with a signal of three increases next year.
The Fed, the US central bank, increased interest rates by 0.25 of a percentage point on Wednesday, following on from a similar increase a year ago.
A strong dollar would make the Republic’s exports be more competitive, while there is also the potential for it to increase the buying power of US foreign direct investment.
****
The double-sided coin that is Brexit was laid bare by two pieces of analysis this week.
One, by the UK’s House of Lords, said Britain’s exit from the EU could have greater financial implications for the Republic than for the UK.
It said Brexit would have profound and unique consequences for all of Ireland, with agriculture, manufacturing, and SMEs worst affected.
The report argued that the only way to prevent a hard Border is for the UK to remain in the customs union or for the EU to allow a bilateral UK-Irish agreement on trade and customs. Michael Noonan responded that there could be no “on the side” deals.
On the Brexit flipside, the Central Bank said on Thursday that UK financial services firms affected by Brexit are expected to make a decision on relocating here or elsewhere in the EU during the first half of next year.
Ed Sibley, the bank’s director of credit institutions, said firms had visited the Republic on fact-finding missions, and that “more definitive deliberations” around which jurisdictions they might choose for relocation can be expected soon.
