Tax Conference

The Department of Finance organised a conference on taxation earlier this week.

The conference materials are here;  the opening speech by Michael Noonan is here.

Comments

comments

68 thoughts on “Tax Conference”

  1. The presentation of Pascal St Amans, director of the OECD Centre for Tax Policy and Administration, is not available even though he made the most reported contribution and he does have an important role in preparing proposals for the G-20 summit in St Petersburg next month.

    He said Ireland’s headline rate is favourable and should be applied rather than rates such as 2%. which provoked a reaction from some people earning a living from assisting multinationals.

    As for the other presentations, I haven’t got PowerPoint on the computer I’m currently using. Saving them as pdfs would have made them more accessible.

    OECD says Ireland must apply 12.5% corporate tax rate not 2%

    Michael Noonan’s speech is a classic example of why people are so cynical about politics.

    “Our taxation system is open and transparent and all companies in Ireland pay tax at 12.5% on their profits earned in Ireland.
    Ireland’s tax regime is set down in statute and policed by our independent, and highly respected, Revenue Commissioners.

    Of course, profits earned by these companies that are outside the scope of the Irish tax system are not subject to Irish tax. Incorrectly counting these profits as “Irish profits” is often the reason for the misleading analysis of the Irish taxation system and throws up very low effective tax rates. We can only tax profits that are liable to tax in Ireland.

    Aggressive tax planning by companies is a major issue of popular interest at the moment. However, it is clear to us from our work at the forefront of efforts at European and OECD level that these issues cannot be addressed at national level alone – we need a co-ordinated international response.”

    Keep singing the mantra “transparent” and wonder why giant companies do not have to file accounts at the Companies Office; large external charges get the same Revenue scrutiny as would apply to a local company? Of course not.

    Even big local companies are likely to be treated differently to the typical SME.

    In contrast, Novo Nordisk, the world’s biggest maker of insulin, has 35,000 employees across the globe, including some 15,000 in Denmark, and has been slapped with a 5.5bn Danish crown ($1bn) tax demand involving the use of Switzerland for tax avoidance.

    Papers seen by DR, the Danish broadcaster, show that Novo is accused of failing to declare a proper value on two drug patents after they were moved from Denmark to Switzerland, and therefore it avoided taxes in Denmark.

    The tax case involves haemophilia drug NovoSeven and growth hormone Norditropin, which are produced in Denmark but their patents have been moved to Switzerland and therefore earnings are now channeled there, DR said.

    “Yet another example of multinational companies placing major funds in places where they do not have any real activities. We have to neutralise this sort of aggressive tax planning through new international rules,” The OECD’s Saint-Amans told Politiken, the Danish daily newspaper.

    Transparent? Why provide non-tax resident Irish companies and then suggest there is no responsibility for them: whether they are used for tax avoidance, crime or whatever.

    As for: “Of course, profits earned by these companies that are outside the scope of the Irish tax system are not subject to Irish tax.”

    The truth is that the net effect of say Google paying almost no taxes on half its global revenues routed through Google Ireland, a tax resident Irish company, and Apple routing billions in revenues through non-tax resident Irish companies, is the same.

    How can the likes of Noonan get away with this nonsense?

    Maybe the Department of Finance needs more economists???

  2. @ MH,

    Pascal Saint-Amans gave a speech; he did not make a presentation. It was excellent.

    Do you think the “test of management” for determining the tax residency of companies is inappropriate?

  3. Brendan O’Connor’s presentation on “The structure of Ireland’s tax system and options for growth enhancing reform” pulls so much very useful comparative information on the Irish tax system together that I expect it to be referenced and linked repeatedly in future on this site.

    The chart on page 9 that shows Ireland to be an extreme outlier on the progressiveness of its income tax system is particularly eye-catching. The ratio between the tax wedge at 167% of average wage and that at 67% of average wage is 275% for Ireland, compared to an OECD average of 145%.

    It is a pity that we cannot hear the detail of what he said on options for change in the tax system, but the three headline options presented are:
    – Shifting the composition of the tax burden towards consumption
    – Shifting the composition of the tax burden towards property taxes
    – Shifting the burden within labour taxation

    The point on shifting the burden within labour highlights low effective tax rates (which the presentation demonstrates are only low on low and medium incomes), and raising the entry point to the top level marginal tax rate, so presumably the overall implication is a rebalancing to make the system less progressive.

  4. Some interesting points made by Mr Brendan O’Connor, top 23% of earners pay 77% of all income tax.

    Obviously this is not progressive enough for certain organisations like TASC, Nevin Institute etc.

    So what would be progressive enough???? 88% perhaps, or 99%.

    What amazes me in discussions about taxation… is that Ireland has a very low entry point to the MTR, this point is totally lost on those who are demanding higher progressive taxation. Good to see Mr O’Connor pointing this out.

    Secondly I have a question for Mr Keith Walsh….”Understanding & Influencing Taxpayer Behaviour”.

    Recently a stamp duty of 1% on shares traded on the Irish Stock Exchange was introduced, I think about 2 years ago.

    Has this stamp duty had any effect on the listings of the ISE, as several companies have delisted from the ISE and are now listed on other exchanges?

    It would be interesting to know (if possible) if the 1% stamp duty is having any effect on the listings of the ISE.

  5. OK. Here we go again about taxation.

    What is missing is a Theory of Income in a monopoly-finance consumer economy. Much of the commentary about taxation I encounter is rooted in classical and neoclassical economic theories – supplemented by religious fervour.

    Waged-labour income is regarded in an entirely different manner to other forms of income. And an income may not necessarily be a ‘money’ one. The issue which generates the most heat, and about as much illumination as a Black Hole, is income re-distribution. The entire discussion (or slanging match) is completely back to front. But few are paying attention.

    Modern monopoly-finance consumer economies mandate that each person needs an income in order to survive, let alone participate as an active member of society – a consumer consuming more each year. A lot more intellectual effort will have to be deployed in order to provide an agreed definition of ‘income’ – it is an ephemeral concept. And what should this income consist of? It can take different forms.

    Modern states cannot survive without the imposition of taxes to pay for its various expenditures. The question now becomes, how will that taxation be raised? The last place to raise it from should be waged-labour. The more you take from wages, the lower the consuming power! We celebrate, encourage, demand, growing consumption. If consumption flags -as it has now – its manure time! Except for the financial sector!

    Taxing consumption with a flat tax looks a better bet: its not. Its deeply regressive – unless those on low incomes have an appropriate ‘top-up’ to compensate them (they spend a higher proportion of their income on consumption of necessaries).

    Taxing assets looks fair. Its not. But the economic rationale (suitably cloaked in religious fervor) is that that fixed asset is MINE (private property) – which is factually accurate. But: “How did you come by that asset sir”. “Out of a Christmas Cracker then?” See what I mean? It just goes on and on. Getting more and more argumentative.

    Modern states and their citizens must have incomes to survive. A Theory of Income in a monopoly-finance consumer economy is badly needed. Its not a Right-wing nor a Left-wing issue. Its about whether or not a modern capitalist monopoly-finance economy can survive when:- (1) the majority of incomes are not generated from productive enterprises (which normally produce a surplus); (2) the median income is declining; (3) income inequality (and asset wealth) is increasing significantly; (4) increasing proportions of the labour force are unable to access meaningful employments; (5) debt producing finance-based enterprises comprise an increasing proportion of the economy; (6) the income demands on the modern state are increasing relentlessly.

    Lots of questions. Few enlightening answers.

  6. Having read the presentations this morning, my conclusion is that this was a useful conference.

    Briefly on a related issue to MNC locations and corporate taxes, Paul Krugman had an interesting piece in Friday’s NYT on the disconnect between profits, investment and production and he compared GM and Apple in different times.

    http://www.nytimes.com/2013/06/21/opinion/krugman-profits-without-production.html

    I have highlighted on Finfacts how big US companies are no longer big employers. For example, General Motors had over 618,000 employed in the US in 1979 – in well-paid jobs; today, General Electric employs 133,000 and Apple 47,000. The US needs to add about 90,000 new jobs monthly to just meet the natural growth of the workforce. General Motors’ worldwide employment in 1979 was 853,000. Today it is about 202,000 with 80,000 employed in the US.

    Enrico Moretti, an economics professor at the University of California, Berkeley, has said that the average tech position creates five additional jobs in various support industries, from doctors to hairdressers to dog walkers. However, the “multiplier effect” for manufacturing jobs is much lower: 1.6 instead of 5. Much of that, he added, was simply the result of the higher wages generally paid by tech jobs.

    About 35,000 of Apple’s US payroll are working in retail outlets and customer support leaving only 12,000 in high tech, design, and marketing.

    Irish economists have for years responded to rising services exports as evidence of “moving up the value chain” and since Micheál Martin, enterprise ministers have used the jargon “quality jobs” or “high value jobs” when many of the jobs have been in sales and customer support.

    @ Seamus Coffey

    Do you think the “test of management” for determining the tax residency of companies is inappropriate?

    What we have seen in recent weeks is a lot of obfuscation and wordplay and senators Levin and McCain in their curt response to Ambassador Collins’ recent letter arguing that Ireland isn’t a tax haven, referred to a “common sense definition.”

    So what is a “test of management”?

    Google Ireland Ltd, a tax resident Irish company, is owned by Google Ireland Holdings Bermuda Unlimited and its parent is Google Bermuda Unlimited. The latter companies are non-tax resident Irish mailbox companies with an address at a law firm in Hamilton, Bermuda.

    There is no separate management and it can be located in different places.

    Neither is there any transparency.

    Following a Nov 2005 Wall Street Journal article on Microsoft’s tax arrangements in Ireland, Matheson, the Dublin law firm, advised clients such as Microsoft, Apple and Google on how they could avoid filing accounts for public access by switching companies to unlimited status.

    Edward Kleinbard, a professor of law at the University of Southern California’s Gould School of Law and former chief of staff of the US Congress’s nonpartisan Joint Committee on Taxation, said in testimony to the House Ways and Means Committee this month:

    I refer to Apple’s Irish subsidiaries that purportedly own and exploit some of the world’s most valuable assets as ‘shell companies’ because they are. Until 2012, the key Irish subsidiary (Apple Sales International) had no employees and no independent ability to act according to its own perceived interests. What little activity the shell companies performed (‘negotiating’ a cost sharing agreement with the parent company, where the shell companies act through the mouthpiece of senior Apple Inc. employees who were ‘dual hatted’ to the Irish companies as well, and ‘negotiating’ contracts with third party manufacturers of Apple products, like Foxconn, when the record showed that those contracts again were in fact negotiated by Apple Inc. employees, and just mirror the contracts used by Apple Inc.) were not in any way performed by actors independent of Apple Inc. Nor have the subsidiaries done anything with their crown jewel intangible assets that is separate from what Apple Inc. does. These truly are shell companies.

    The US determines tax residency based upon place of formation. Under US law, a company is a tax resident of the country in which it was established.

    So the US views the Irish non-tax resident companies as the responsibility of Ireland while the Irish authorities say they’re not their concern if their management and control is outside the country.

    The concept of “stateless income” and the fact that up to now, an Irish registered company that is non-tax resident, would be less likely to raise suspicion than one in micro country tax havens, must be an attraction for criminal enterprises. The required link with a tax resident company is hardly a big challenge.

  7. @Michael

    Was it not the British who left that ‘management’ definition behind? Such a definition would probably be suited to imperialism.

    That leaves me with a few questions.

    Do other countries not have such a definition for tax residency?

    If so could a US company not pull the same ‘Ocean Income’ trick there?

    Even if the answers are no to these two questions, why is Mchael Noonan wrong to argue it’s a US problem? Considering ‘Ocean Income’ is possible because of a loophole as a result of 2 tax systems, why take sole responsibility for it?

    Is he not right to say that the US can close off the loophole unilaterally. If he moves unilaterally on it, then it sends out two signals.

    1. That Ireland has been in the wrong to date and has been operating as a ‘tax haven’.
    2. He says to the NMC sector that the tide is starting to turn.

  8. @Nevermindme, @DOCM

    The Irish FDI tax-based BM will change. Whether we openly facilitate it or are privately muscled into it. Either way it will bring enormous changes to the national tax base and in all likelihood precipitate the adoption of an enterprise strategy which is industry-led rather than the unique setup that prevails today.
    Personally I think it would be better to embrace this change proactively rather than risking being ‘Cyprussed’. But ‘better’ is situation-specific. For example, for a Big Five tax planner, or commercial lawyer, or MD of a corporate services firm this transition may force a choice between retirement or emigration.
    Sustainable businesses control their assets and/or their environment. Ireland’s recent FDI tax-based BM is vulnerable because Ireland no longer controls the environment (loss of sovereignty) and never controlled any assets (little IP or know-how has leaked from the FDI into the SME economy in 30 years of hosting such business.
    Re-engineering unsustainable BM’s is not easy and there will be casualties whatever is done. The lesson to learn is that sustainability is about control, and unsustainable enterprises are not worth getting involved with. Which has profound implications for the knowledge economy and similar aberrations, as indeed it does for almost everyone.

  9. @Nevermindme

    why is Michael Noonan wrong to argue it’s a US problem?

    Even if the US had a territorial corporate tax system, where US MNCs were liable for tax on only earnings from US sales, absent a change in the existing international rules or US tax law, there would be no change in the regime where Microsoft has told the US SEC and the US Senate Permanent Committee on Investigations that it has 3 regional overseas sales centres: Puerto Rico (even though part of US, it has its own tax system), Ireland and Singapore.

    Based on consolidating financials (without eliminations within those groups), in FY 2011 the Irish, Singapore and Puerto Rican companies earned approximately $15.4bn in earnings before tax (EBT), or approximately 55% of global EBT. The average effective book foreign tax rate for the Irish, Singapore and Puerto Rican companies was approximately 4% – – 5.69% in Ireland; 2.78% in Singapore and 1.03% in Puerto Rico.

    So Microsoft’s 1,914 employees in Ireland, Singapore and Puerto Rico from the group’s total head count of 90,000, were responsible for 55% of 2011 profit before tax.

    The risk of a territorial system for the US is that there would be further outsourcing to low-tax countries and if Noonan thinks it’s solely a US problem, a solution would be if the US cut its corporate rate from 35 to 25%, is to mandate that US companies would have to pay a minimum tax rate of say 20% in any foreign jurisdiction.

    The Obama administration has proposed such a change without specifying the minimum rate.

    As for non-tax resident companies, it’s ridiculous that an Irish finance minister would claim that Ireland has no responsibility for what its companies are used for.

    @ Tony Owens

    While Microsoft uses Ireland as a tax haven, it has 3 overseas strategic R&D centres and they are in Israel, India and China.

    I agree with you that Ireland needs a new jobs model and each week, IDA Ireland spaces out its announcements of low jobs projects for public impact but the era of significant FDI projects is over.

    Chinese companies tend to buy existing ones in Europe rather than have greenfield projects.

    Craig Barrett, former Intel CEO, said in Dublin in 2010 that Ireland had a ‘blueprint for success’ that led to an influx of FDI but it is no longer relevant and a new one needs to be drawn up.

    He said the problem for Ireland now is that the FDI-focused blueprint is no longer practical in a world of 3bn new capitalists from the fall of the Iron Curtain and the integration of China and India into global markets.

    Ireland needs to do something new. “You need to figure out what you want to be a worldwide leader in.”

    He said 90% of countries around the world envision themselves as potential leaders in the knowledge economy and it is no secret that technologies such as nanotechnology are key. He said that Ireland until now led its growth from external investment but now will need to focus on growth from within and that means supporting entrepreneurs and start-ups.

    “The FDI era is over. Real economic investment will be indigenous and growth will come from investment in new ideas.”

    However, Ireland’s indigenous sector has had a poor record to date despite low social security costs and corporate taxes.

    Why is there no debate on a failed enterprise strategy?

  10. @ Tony Owens

    Perhaps the game is coming to an end. How and when it ends is up for grabs though.

    @ Michael Hennigan

    I agree that these global companies are taking the piss. They should pay more tax. It’s in the common good. The 12.5% is favorable enough in my book. I think we could retain a lot of FDI even with this ‘ocean income’ loophole closed and it should be closed.

    Though to close it, unilaterally ‘on the hop’ in response to political posturing in the US isn’t the way to go. It says ‘We were/are at fault and we have been caught out’. It also shows a weakness, that our laws are subject to change once any kind of pressure is applied. If the US are going to deal with it on their end, why should we?

    Besides, since when do countries unilaterally do what’s in the common good? Didn’t see the US rushing to sign up to the Kyoto protocol. I don’t see the Germans overly concerned about their trade surplus. Or the British overly concerned about their financial services ‘industry’s impact on the world etc etc etc “Countries have interests, not friends.” and all that.

  11. “Why is there no debate on a failed enterprise strategy?”

    Good question. Possible answers:
    * Disinterest
    * Ignorance
    * Perceived irrelevance
    * Lack of confidence
    * Fear
    * Preference for status quo

    Lets test the hypothesis that there is no debate. Here is a short ‘straw man’ manifesto for an improved enterprise strategy. I welcome comment:

    Preamble.
    It does not actually need that much to change to put Ireland on a more sustainable economic trajectory in anticipation of a future contraction in the profitable business of providing business services to FDI firms. Ireland is a good location already for research-intensive businesses and with small changes could be an excellent location. This is fundamental to nurturing and tethering mittelstand-type firms and their promoters within the jurisdiction.

    Suggested Initiatives.

    1. An impartial and cost-effective legal environment is essential for enterprise. The Irish legal environment though impartial compares unfavourably with other jurisdictions from an SME perspective. It is relatively expensive, antiquated and easily gamed. In practice many SME’s cannot afford to enforce their legal rights, making inter-firm collaboration risky and discouraging enterprise. Just fix it!

    2. The Irish R&D tax credit is a little-used but very helpful support for SME’s. It is amenable to self-administration by SME’s, in contrast to Canada and the UK, for example, where involving external services firms to audit and administer claims is far more necessary. The scheme encourages firms to generate proprietary knowledge about solutions to technical problems with a commercial dimension (in other words IP). A systematic, evidence-based and auditable approach to such work is mandatory and the financial consequences for abuse severe. That sounds sensible to me. So actively promote greater participation!

    3. The Irish version of the Innovation Voucher scheme (lots of countries have adopted these) is limited to academic R&D performers. This has crowded out a number of private sector businesses. It should be broadened to include any R&D provider chosen by the firm awarded the voucher, provided they are registered to pay tax in Ireland.

    4. Establish ‘maker clubs’ through IT’s and those Solas campuses equipped for rapid prototyping and hands-on teaching of design and engineering skills. Provide partial funding to such clubs to deliver tuition in mechanical and electronic design, machining, and common materials at cost. Hold national robot wars, furniture making contests, rocket-building, car tuning contests.

    5. Offer bonus points for French, German, Spanish and Italian at leaving cert.

    6. Organise exchange programs for mid-career Irish public servants to work in other EU states for a number of years (and vice versa). Fast-track the promotion of those who complete such rotations.

    7. Oblige public sector organisations to source at least 30% of the products and services they procure, by value, from EU-resident SME’s or microbusinesses.

    8. Commission a high quality managed matchmaking service for connecting investors, entrepreneurs and professionals. (There are a number of similar things already but none are much good)

    9. Commission and maintain publicly accessible patent landscaping studies for the top 25 most popular subject matter areas of investment proposals made to Enterprise Ireland. Limit growth capital to promoters with patent-grade innovations and credible understanding of how to use IP assets in their fields of business

    10. Duplicate the excellent Smurfit/Bord Bia international food marketing Fellowship scheme in at least five other business sectors of importance to indigenous business. (This is a cost-effective way to build bridges from Irish firms to export customers as well as to ease ambitious Irish professionals with little hope of paid employment in Ireland at present into employment abroad while maintaining links with them)

    11. The current apartheid in enterprise support between public sector (mostly academic) and private sector research performers needs to be ended. Why should private promoters and investors have to compete with sheltered public-sector businesses (whom they help fund through their taxes) for access to people, finance and other resources?

    12. Undertake and publish biannual value for money reviews and benchmarking studies of the Irish national enterprise support and science programs by an authoritative international panel of researchers.

    13. Commission the design of a quality apprenticeship system to provide an attractive alternative to graduate degrees, including a system of state subsidy payments to participating employers.

  12. Why is this man ( Tony Owens) not the Irish Minister for ( Indigenous) Enterprise and Innovation?
    Note: I’ve dropped the ‘Jobs’ from the current official name of the said government department. If we get the enterprise strategy and policy right, the jobs will follow. The taxes too!

  13. @ RF: “Why is this man ( Tony Owens) not the Irish Minister for ( Indigenous) Enterprise and Innovation?”

    Because. Read #5. above. Classical status quo guff. As a former educator I could suggest somethings. But it would be a royal waste of my time – and bore the hell out of the reader.

    “If we get the enterprise strategy and policy right, the jobs will follow. The taxes too.”

    Nope. There is no ‘right’. This assumes something that does not exist. Well, it may exist, but only within the dim imaginations of economists and their dreary text books, their journal articles and their infallible public oratorios. Folk are easily bamboozled. Mistake the virtual for the real. Not so nature. Nature is one bad bitch.

    You first have to identify the sector which has some sustainable employment opportunities (in Ireland this is probably agri) – and crucially the resources and competences to deploy those resources to ensure the employments are created. And those resources are NOT tax incentives nor reliefs. Folk create employments because the produce of that employment, will when sold, to willing and able Demanders, yield a surplus.

    We have useless, intellectual flagellation sessions (like the above Tax thingy). Just do not try to engage folk in any meaningful intellectual manner with the actual predicaments we face. They exhibit a 10 sec attention span.

    Here’s a sample of what I mean: What is income? Why is it necessary? What is the effect of debt (esp. changes in debt levels) on income? Why was/ is the neoclassical economic theory about the relationships between wages/prices invalid? Have fun!

  14. Brian Woods Snr.

    Hi Brian.

    I seem to remember finding myself in agreement with much/some of what you contributed a couple of years ago.

    Back then I was on about how our FDI-based enterprise model, generating the real or fictional exports on which (at least the figures for) our growth were based, was going to come in for a serious bashing, (at that time from ‘Europe’), that it wasn’t creating significant net new employment, that we needed a new enterprise strategy, and that ( needs must!) we should start to look at emigration as an opportunity for acquiring work shills, experience and revenue. I wasn’t alone, and took inspiration from great analysis over a sustained period by Michael Hennigan. There was also some pretty good stuff from Edgar Morgenroth ( spelling?).

    I also referred to the need for an audit of the (real) export capability of the indigenous sector ( not seeking unattainable space on global retail shelves for small scale unsaleable ‘Irish’ brands through obselete distribution vehicles like agents, distributors and importers) along the lines of Telesis Report way back in the 70’s.

    Of course there’s no ‘right’ enterprise policy. And I happen to agree about the French and Italian language bit. ( We export virtually no ‘Irish’ products or services to these current and future quite challenged markets).

    That said, and given that I don’t look too much at this site these days, I have seldom seen a more ‘workman-like’ but imaginative set of immediately actionable suggestions for the indigenous sector that that produced by Tony.

    Given that others ( including some influential US political honchos) think our current model has a whiff about it, Tony’s list might start us down the road to a ‘righter’ model. Just a thought.

    Perhaps this thread isn’t the place to do it but the proposals merit serious debate and I take my hat off to Mr. Owens. Bravo!

  15. Hi, Tony. Greetings, again!

    The status quo is very deep and very dark. A great weed. Rooting it out is a hazardous enterprise. Does not mean that it should be left to flourish. Its starting to seriously undermine the foundations.

    My experience with modernizations is that they generally survive only a short time after their principal promoter/enabler departs (or is shunted off!). Then its back to biz as usual, and “move along, nothing to see here”

    You need a truly cathartic, externally produced, political economic event/s (which is/are a very bad thing indeed for the vulnerable, rather than the better endowed). This is coming. Its known as an Oil Shock. My guess is sometime between 2015 and 2020. Lots of unknown unknowns!

    In the meantime I would spend any economic surplus on our main-line rail, water and electric transmission lines and agri resources. Allotments are looking good. Do horticulture, young lady!

    Cheers.

  16. Oooops!!! Apologies Richard and Tony. Wrong greeting! Brian is on the sauce again!

  17. I thought of Irish bogs today as winds brought haze and carbon from burning rain forest peat lands in Sumatra!

    Some interesting points above.

    Brian’s oil shock maybe deferred with North America moving towards energy independence.

    The Netherlands is the biggest gas producer in Europe and a rise in mini-earthquakes in the Groningen region is causing concern.

    In 2012 the Dutch government made about €14bn from the Groningen gas fields. Without these revenues, the Netherlands’ deficit would be similar to that of crisis-struck Cyprus (6.3%).

    Richard highlights the battle to get shelf space or other channels for exports and Tony refers to the R&D tax credit.

    Given the public investment in the enterprise area over of the decades, it’s striking how little data is available on what works and what doesn’t.

    As it could take up to 20 years to put the economy on a sustainable path led by the indigenous sector, the first important step should be an honest assessment of the reasons for the failures to date.

    Language is an issue in exporting but the bigger issues are the low number of startups, the low number of SME firms, the low number of SME firms that export, the low level of SMEs in manufacturing: 3% compared with the EU average of 10% and the poor state of agriculture.

    The 2004 ‘Ahead of the Curve’ report on enterprise strategy looked at these issues and increasing the potential for innovation was one of the recommendations.

    Of 1,200 firms claiming the R&D tax credit, less than 300 are foreign-owned but it appears that saving tax rather than improving innovation has been the impact in the indigenous sector.

    Keep in mind that the typical high growth firm is not in high tech.

    Wonder too why the once big hope in the pharmaceutical sector, is now an investment shell operation:

    http://www.finfacts.ie/irishfinancenews/article_1025983.shtml

    Unless high growth indigenous firms are embedded in sectors such as food, once they reach a certain size, they can internationalise, both in focus and share ownership, without and significant benefit for the economy.

  18. @ MH-ff: “Brian’s oil shock maybe deferred with North America moving towards energy independence.”

    Energy independence??? I assume you mean no need for imports. Long time ago, that was. Mike, those critters (and the Canuks) consume the equivalent of 10 l/person/day. Now assume the downturn drops that back to 7/8 l/p/d – and it stays there. Very wishful. Those shale-gas wells deplete very rapidly. Need for 24/365 drilling.

    Watch the guys in your neck of the woods (China + India + Indo). All are nett importers. All have increasing domestic consumption. All have increasing populations – eager to be like us! And there sure as hell are a lot of bums over there!

    “As it could take up to 20 years to put the economy on a sustainable path led by the indigenous sector, …”

    + + + + +!

    “Unless high growth indigenous firms are embedded in sectors such as food, once they reach a certain size …”

    They will plough any surplus into financial products, rather that productive stuff. Bang goes any indigenous benefits. You reach the productive margin quite fast. Anyway, food production can be highly mechanized. Wage bill for locals would be lowish.

    Unless! Can you see that ‘unless’ any time soon? I can’t. But, who knows?

  19. When I read the manifesto of Tony Owens,

    I became actually tempted from some point on, to raise my fist and shout YES after each point : – )

    One tiny additional point, which might be worth to look at. In Germany we realized 10 years ago, that there was here too much focus on > 10 employee “real” companies”, and fostered the half-time, one person, start-up, Ich-AG, Gründerzuschuss, etc. a lot more. A lot of them do not last very long, but some then grow, and one should be careful about the predictability.

  20. Quite a number of interesting points concerning my ‘manifesto’ – thank you!
    Francis alludes to the fact that microbusinesses represent a large slice of overall economic activity yet rarely receive much support from anyone. For government policymaking this may be a blindingly obvious misallocation of resources – a spot of quality independent research would be in order.

    Brian and Michael are sceptical of the feasibility of tethering firms that grow (or in that smarmy term ‘get traction’) so that the centre of their business interest remains within the jurisdiction and there is a return to the economy.
    I think that concern is a bootstrapping issue. If Ireland is kept an attractive place to locate management of indigenous multinational business and critical functions such as RDI and IP management, then that is what will happen. As for export trading and M&A activity, by definition an export-oriented indigenous multinational needs to grow overseas operations. How else are these things done? Personally, I’d like to see more Kerry Groups, CRH’s, Creganna’s and PCH’s and I think the residual tax flows, expertise and return of experience to Ireland are reward enough for the relatively small investments made in these private businesses by Irish taxpayers in their formative years. Of course there are also Irish businesses which have abused the state as an investing stakeholder. As in any other country. There is risk in all investments.

    I am shocked at Michael’s statistic concerning the low number of the state’s 230k SME’s availing of the R&D tax credit. I am interested that it is possible to determine that improving innovation rates have not been observed. I wasn’t aware that Forfas had been monitoring this though I certainly think it needs to be.

    Brian and (indirectly) Michael seem to feel that supporting certain types of businesses e.g. food and nutraceuticals is better than others on the ground that they are more likely to remain tethered in the state. Perhaps, but I am sceptical about any attempts to ‘pick winners’ or to tether businesses. I think we need very simple clear enterprise support policies that make it rewarding for SME’s to locate their main interests in Ireland, whatever sort of businesses they may be. End of.

    Brian reminds us of the personal risks of challenging the status quo and the need for more and better collectively-owned assets for wealth creation such as network infrastructure.
    I think some people take risks and some people dont or cant. I think it is very clear that ‘official Ireland’ wants to see lots of startup businesses. The problem is that there are conflicting interests involved which need to be resolved (e.g. administration of commercial law and the role of third-level institutions), and most SME business promoters cant spare the time to educate policymakers about what helps or hinders them.

    Richard posits the value of research to explore the realistic export capacity of Irish business in view of the realities of competition for distribution channels and the enormous financial commitment required to build valuable brands.
    This is absolutely true. In the food business I happen to know that many French and New Zealand producers have subsumed their corporate identities and opted into collaborative national branding of their product exports (into Germany for example), with high quality consistent labelling, inspection and sustainability standards. Many Irish producers seem to struggle to see the value of collaborative marketing and co-branding approaches. The fierce individuality and tribalism that is part of our national character coupled with commercial law that is beyond the reach of many SME’s makes voluntary collaboration a last rather than a first resort.

  21. @Micheal Hennigan

    Why is there no debate on a failed enterprise strategy?

    Because it didn’t fail, not for the people who mattered. Civil servants in charge of programs became wealthy in their jobs, connected businesses had a windfall of free government money, and when the houses of card collapses, liquidators and recivers stepped in to feast off the carcasses.

    If you follow the money in Ireland, it almost always flow back to the classes making the decisions.

  22. @ Brian, Tony

    Peak fossil-fuel energy maybe deferred…Israel is set to be an exporter of gas in coming years…the love affair with the car is abating in the US and Europe that is unrelated to the recession…the average age of a US car is over 11years and in Europe over 8 years (tech advances are a factor on age and energy consumption).

    I don’t believe in picking winners but looking at Nestlé, the world’s most successful food and non-alcoholic drinks group, it has as many R&D employees as the number of researchers the Irish government is funding. However, in expanding our footprint in European markets, I would bet more on what Nestlé is doing than say on nanotechnology.

    The big flaw in the R&D tax credit is that the Dept of Enterprise has confirmed that it doesn’t know if over 10 years any claim for it was ever rejected. The Revenue would have to assess the validity of a claim during a tax audit and it has no data on that either.

    So it’s a dodgy metric of innovation activity.

    The FDI sector spends about 70% of what is termed business R&D and most of this is not in high level research activity.

    IDA Ireland says it has no minimum level for it calls the R&D ‘component’ of new projects. So its data is also dodgy.

    What is striking is that only about one-third of foreign firms do claim the R&D tax credit.

    The goal of moving them up the value chain has generally failed and the poor record of the indigenous internationally tradeable sector, suggests that the local MNC linkages have been poor.

    In Finland, Nokia may disappear but a strong indigenous tech base will remain.

    Last Friday, the Government announced a €50m joint research project in Cork with private sector companies including the Kerry Group.

    The taxpayer contribution is at least 79%.

    http://www.finfacts.ie/irishfinancenews/article_1026173.shtml

    A new Irish strategy will have to involve many arrows.

    We are currently like a struggling company trying to sell too many product lines in too many markets while not focussing on the ones with the greatest potential.

    @ OMF

    Yes, most of those who speak about issues such as entrepreneurship, do so from comfortable economic hammocks.

  23. @ All

    All the items listed by Tony Owens are eminently sensible. The problem is that they argue for an approach from specific cases to help create the right general policy when the latter is unlikely to be decided in this manner until the general political and business culture in Ireland is radically altered.

    http://www.independent.ie/business/irish/taxpayers-lose-millions-in-enterprise-ireland-failures-29365530.html

    Maybe the story just breaking with regard to Anglo-Irish Bank may prove to be the catalyst!

  24. @ Tony

    I’m very pleased that your thoughts are getting some attention and debate. Just concerned that ‘Tax Conference’ is not the heading/thread under which your very important indigenous enterprise proposals will get the attention they deserve.

    When I posit ‘research to explore realistic export capacity of Irish business’ I mean, really, having the maturity to accept the conclusion that, for example, we may NOT have the resources to build truly global ‘Irish’ brands in the consumer products space. We are talking about hundreds of $billions over a long, long period.

    From memory, one whisky brand, Johnnie Walker, represents retail sales in the order of $6 billion, about 8% of the world market, in a global ‘whisky’ market dominated by a couple of multinationals and where, I believe, 5 of the top ten brands in the world are ‘Indian’. Depending on how you define ‘whisky’ and whether you consider ‘Indian’ brands produced by ‘European’ Multinationals to be ‘Indian’!

    Again, from memory, total ‘Irish’ exports of ALL drinks would be of the order of €1.5bn, albeit at ex-Ireland prices.

    Global consumer product marketing is not a mystery. ‘Subsuming corporate identities into collaborative national branding’ is certainly an option but usually an option adopted from weakness, a recognition that the participating companies do NOT have the resources to build a real global brand alone.

    This approach also exposes the entity doing it to resistance, precisely on the basis of the ‘nationality’ of the approach.

    I’m not aware of who is doing this successfully at scale. Enough to worry the ‘real’ global brands!

    I have suggested before on this board that much could be learned from New Zealand, Fonterra, the world’s leading milk processor in particular. Which achieved its position in the world WITHOUT the benefit of (the equivalent of) European agricultural subsidies.

    It is not clear that Fonterra, at this point, relies on a global consumer ‘branding’ strategy, much less a strategy that has anything to do with, in the consumers’ mind, ‘New Zealand’, the brand (sic).

    I’ve repeated, ad nauseam, that while, for example, there may be ( somewhat) significant exports of Irish beef to this market ( France), these exports are NOT identifiable to French consumers as ‘Irish’ in any shape or form. AND, if they were, the prevailing ‘made in France’ mood here, would NOT be to the advantage of those ‘Irish’ beef exports. Unless the branding investment was such that the consumer, who currently does NOT know Irish beef, were to be pre-convinced, at enormous expense, that it was better to buy it than French beef. AND that it was available qua ‘Irish’ ( that is, identifiably ‘Irish) in virtually every retail multiple in France. Which it’s NOT, after 40 years of great Bord Bia work!

    I really don’t know who is addressing these issues realistically. Choices have to be made. And it may not be possible resource-wise to be ‘successful’, in the global consumer products space and identifiably ‘Irish’ at the same time.

    Once again. Bravo! for your (fighting!) Irish but not necessarily ‘Irish’ ( if you follow me) manifesto.

  25. “Why is there no debate on a failed enterprise strategy?”

    One way to look at it is that the core of our enterprise strategy is OK. It worked fairly well up to around 2000 on both indigenous and FDI sides, but it was throttled by rising costs and talent shortages caused by the property and public service boom.

    Our costs are still a long way out of line with what our enterprise policy can support, and we are stuck with the bubble’s legacy of too many of out best people hitting mid-career with horribly mismatched skills. The idea that we need to avoid deflation, limit asset price falls, focus on boosting domestic demand, ignore defective competition in non-traded services, and protect public servants and people on low to average incomes has taken hold of policymakers, ensuring that it will take another decade to tackle our cost problems sufficently to get our enterprise policy back on track.

    The ideas in Tony Owens’ manifesto are mostly fairly solid, but even if implemented they would only have a marginal impact on the success of our enterprise policy. Comparably useful ideas for improvement are being identified and adopted by our enterprise development institutions regularly without a step change improvement in the overall performance of our enterprise policy.

  26. @BeeCeeTee

    ‘Comparatively useful ideas for improvement are being identified and adopted by our enterprise development institutions regularly without a step change improvement in the overall performance of our enterprise policy’.

    ‘Identified and ‘adopted’?

    OK. Such as? And executed/implemented? Really! How are they doing? Seriously, not being difficult! Where would one find evidence of the results? And their positive effect on the performance of the indigenous sector to the point where we can happy/complacent and NOT need a ‘step change improvement.

    I have to say that when I was running companies, even in good times, ‘we’re bumping along fine’ doing better we were or might be, would not have struck me as the appropriate mind set to bring to an increasingly cut-throat and competitive, not to say fast-changing and chaotic, global marketplace. Good luck with that!

  27. @ Richard Fedigan

    Both BeeCeeTee and DOCm make good points and Minister Richard Bruton currently has a 333 point laundry list of job actions – various ones can help here and there but it reminds me of the national ideas competitions that were popular after the bust.

    Bruton hasn’t got a jobs startegy that is based on an unvarnished assessment of the challenges.

    I have mentioned here before a plan he announced in April to add 20,000 jobs in manufacturing by 2016. He halved a target of 43,000 by 2020 that was presented to him by an ‘expert’ report. Adding more than 25% in net jobs in manufacturing is a tall order at the best of times.

    The report itsself is full of aspirations but not much reality. Bruton has likely by now forgotten he launched it. As for the apprenticeship system that is a shambles….

    http://www.finfacts.ie/irishfinancenews/article_1025886.shtml

  28. @ MH

    On the ability of firms to create “stateless income” you say:

    The US determines tax residency based upon place of formation. Under US law, a company is a tax resident of the country in which it was established.

    So the US views the Irish non-tax resident companies as the responsibility of Ireland while the Irish authorities say they’re not their concern if their management and control is outside the country.

    Here is one person’s take on the scheme used by Apple.

    Apple is exploiting an absurdity, one that we have not seen other companies use. The absurdity need not continue. Although the United States generally looks to where an entity is incorporated to determine its tax residency, it is possible to penetrate an entity’s corporate structure for tax purposes, and collect U.S. taxes on its income, if the entity is controlled by its U.S. parent to such a degree that the shell entity is nothing more than an “instrumentality” of its parent, a sham that should be treated as the parent itself rather than as a separate legal entity. AOI, AOE and ASI all sure seem to fit that description.

    In short, these companies’ decision makers, board meetings, assets, asset managers, and key accounting records are all in the United States. Their activities are entirely controlled by Apple Inc. in the United States. Apple’s tax director acknowledged to the Subcommittee staff that it was his opinion that AOI is functionally managed and controlled in the United States. The circumstances with ASI and AOE appear to be similar.

    Our legal system has a preference to respect the corporate form. But the facts here present this issue: Are these offshore corporations so totally controlled by Apple Inc. that their identity as separate companies is a sham and a mere instrumentality of the parent, and if so, whether Apple’s claim that AOI and ASI owe no U.S. taxes is a sham as well?

    I’m sure you know who said this.

    So where is the gap that Apple are getting through? Ireland has a rule that allows the tax residency of certain companies to be determined by the well-established “test of management”. Ireland applies that rule. The US has a provision that allows “instrumentalities” of US parents to be taxed in the US. The US does not invoke that provision.

  29. @Richard,
    My point is not that we should be complacent. The government has a regular process of trying to collect ideas comparable to those that Tony Owens has produced, filter them for practicality, and implement the ones that look promising. The results show up in its Jobs strategies among other places. The workings of the process are not very consistently in public view, but if you trawl through the material that Forfas and EI publish you will see a good chunk of it.

    My personal view as to why it is is not working as well as we would hope is that the government is sabotaging a reasonably solid enterprise policy through other policies that suppress downward price adjustments in the economy.

  30. @ Tony: Thanks for those thoughtful comments. If I do ‘sound’ somewhat cautious – cynical even, its due to some quite awful personal experiences.

    For what it is worth. All you need are three key, closely linked objectives: (keep all aspirations and aims in a dark location). Your statement should look as follows:-

    Upon completion of the programme, we shall be able to:- 1,2 and 3.

    Easy to explain. Easy to comprehend (most folk have limited attention spans). Difficult for the likes of Vinny B to interrupt you. If you are clear and determined on the outcome/s, the process/es is/are self-explanatory (or should be). Its known as establishing and maintaining editorial control. Tricky. But essential. And the resisting forces WILL play dirty!

    One major problem is the complete denial about our current failed (and failing) policies.:ie-

    ““Why is there no debate on a failed enterprise strategy?” Because it has NOT failed. [It actually has not, it just never went into effect!]. So what you experience is:-

    “Those ignorant, ungrateful people are simply too clueless, too lazy and do not understand what we are doing is for their own good.” “They just need to get up off their arses and do a days work”. Or some such sh*tty guff.

    I attended many, many ‘planning committee’ meetings where the principle participants spent the first half of the meeting whinging and complaining about some current problem – and the remainder of the meeting dissing any proposal to fix the problem. The principle ‘excuse’ being uncertainty about the outcome of any change. Bottom line: they got some temporary psychological relief. But they never left their Wisteria Lane cul-de-sac. It was quite sad.

    And if you thought the technological planners were poor. The educational ones were quite appalling. Like really dreadful. Have you seen the current Primary programmes in math? The texts and the workbooks? Grim stuff indeed. Michael Hennigan might have some useful insights from the Singapore Mathematics Programme.

  31. @BeeCeeTee

    Getting just a little semantic here, aren’t you? I don’t doubt that the results of processes show up in strategies and I’m not really interested in whether the the workings of the process are in the public view.

    Processes, public or not, should produce policies that give rise to strategies that are implemented. The results of the implementation will show whether the strategy and the policy behind it are working.

    Our indigenous sector is by and large out on its feet. So, if you’re suggesting we should be complacent about the policies and strategies that brought this about, you’ve lost me.

    If you’re suggesting the government should stay out of enterprise strategy or is pursuing a number of policies ( you mean implementing other strategies) that contradict each other, then at least I understand you!

    That said you do seem to accept that ‘it is not working as well as we would hope’.

    So it needs to be changed. Or dropped!

  32. @ Tony Owens

    I like your list but would add something about funding.

    Currently Irish pension funds invest most of their money in bonds and equities with a sizeable portion invested abroad and performance of the equities has been shocking in recent years, especially concerning so called blue chip investments. It should be possible to link pension tax relief to investment funding for local businesses with potential. They won’t all succeed but if a dependable source of low cost funding is available there should be more than a few that can generate higher returns than bottom feeders like the banks.

  33. @Richard,
    A good enterprise policy is a necessary but insufficient condition for good enterprise results. Our indigenous sector is out on its feet, fundamentally because its cost base is still far too high relative to its capability to deliver value. We are already picking up enough of the opportunities to improve enterprise policy so that we are unlikely to be able to speed up progress.

    Tackling the cost base is in direct opposition to the government’s strategies to support demand in the domestic economy, to bolster returns from its own commercial and property activities, and to protect low earners, so it loses almost every time.

  34. @BeeCeeTee
    @Tony

    OK. The Government’s strategy is, in fact, to support demand in the domestic economy, and bolster its commercial and property activities, by enabling dastardly low earners to keep the Irish cost base uncompetitively high.

    Our Corporate taxation system is not under threat, our enterprise strategy is fine and the indigenous sector’s exports will spike as soon as costs drop low enough.

    Sorry, Tony. I had a feeling your manifesto wouldn’t get the attention it deserves on this thread at least.

    I’d be honoured to buy you whatever your tipple is next time I’m in Ireland.

    Bon Courage.

  35. Seafoid,
    I thought your handle was ironic but not sure now. How about allowing the DC punter put his money on the 7.30 at Kilbeggan. Possibly less risky than a start up & at least you know that your money is gone to heaven quickly.

  36. BeeCeeTee:

    Interesting observation about the effects of conflicting state policies (strategies) on results. I have found that finding and addressing conflicts is the only sure path to getting strategies to work.

    I dont really agree with you that the exporting part of the indigenous SME base is weak fundamentally because of a poor value proposition. That may be true for the 75% of the total indigenous SME base that is engaged in retail

  37. How many AIB shares did you have in your pension fund, Tull ?
    Equity itself is risky. Even blue chip. Or especially.

    The FTSE still hasn’t recovered the level it had in Q1 2000 . In real terms it’s way off. And the outlook isn’t great either.

    And then you have the charges.

  38. Sorry about that. My last post should have read:

    BeeCeeTee:

    Interesting observation about the effects of conflicting state policies (strategies) on results. I have found that finding and addressing conflicts is the only sure path to getting strategies to work.

    I dont really agree with you that the exporting part of the indigenous SME base is weak fundamentally because of a poor value proposition. That may be true for the 75% of the total indigenous SME base that is engaged in retail, logistics, trade services and other commodity-type activities. But the thin slice that has true export potential seems to me to suffer from a whole set of other problems, many of them related to isolation, access to experienced people, ignorance about technology and IP, poor access to capital on commercial terms, the legal environment etc.

    While rents, fuels, government services and income taxes are high, I’m not sure that those issues actually dominate for firms realistically export-capable.

  39. S,
    The MSCI has recovered to 2000 levels – not great but at least the money is still there. On the other hand, when I think of some of the SME money pits dreamt up by the Irish investment community , blue chips suit me fine. Baltimore, Classic Thoroughbreds, Datalex, Iona…..

  40. @ Tull

    It wouldn’t be 100% of the money. Say max 20%

    I’ll raise you GPA, AIB, BoI and ILPM

    The big question for me is where are the returns that drive pension assumptions going to come from.

  41. And bonds aren’t going anywhere either …..
    That 30 year bull run looks like it has ended

  42. @Tony,
    It’s the exporting, and potentially exporting, part of SME sector that interests me. It suffers from the problems you have listed, but we have had people responsible for enterprise policy working on resolving those problems for decades, and they have not gone away. Those people have taken advice from working groups on which people much like yourself have been well represented. We certainly have to keep trying, but it stretches credibility to think that another round of the same process will magically solve the problem.

    Part of the problem is that we are engaged in a red queen race on improving the enterprise environment, where we keep adapting but our competitors do too, making it very difficult to get ahead.

    It’s unappealing to say it, but costs are always a component of competitiveness. We have had a major loss of cost competitiveness since the latter half of the 1990s, when our enterprise policy was last in working order.

    Rents, fuels, government services and income taxes are high, but you are right that they don’t dominate. Action on costs needs to attack a much broader base. Given freedom to act, the first points on my agenda would be to attack rents and margins in wholesale and retail, so as to drive down the cost of living, making it possible to cut labour and social welfare costs without damaging living standards.

  43. Minor point of correction. Income taxes are of course only high for people who earn significantly above average. They are among the lowest in the developed world for people on low to average incomes.

  44. @Tony Owens

    What would you do about the education system ? Ireland needs a holistic approach to getting out of the current hole.

  45. @Tony Owens

    What would you do about the education system ? Ireland needs a holistic approach to getting out of the current hole.

  46. @Seafoid

    I wouldnt presume to offer a manifesto for ed! My personal experience of the Irish system is that it needs modernisation and customer focus.

    Generalising my very limited experience of primary-level, the difference in parental collaboration between a typical Irish primary school and a private international school in south Dublin is eye-opening. The lack of language teaching apart from Gaelic seems very odd. Irish parents seem to spend much of their time compensating for the sparseness of the state-provided 3R’s syllabus by buying the missing bits (‘activities’ such as music, sports, drama etc) and ferrying kids around between the providers of these.

    My observation and limited experience of teaching at third level is of too academic a syllabus; poor teaching of creative and intangible subjects like design, invention, leadership and behavioural skills and of people in undergraduate courses who clearly were unengaged.

    The system seems to focus on delivering embryonic graduate professionals at the lowest cost per head. The teaching of trades and services skills seems to have been nationalised by the state for some reason, and lacks glamour to put it mildly.

    Much better grounded analysis and proposals are to be found here: http://www.swangroup.org/

  47. @ Seafóid: “The big question for me is where are the returns that drive pension assumptions going to come from?”

    Eh! Good question. Now, can we move on! [A: The returns ain’t coming]

    Some unfortunate folk are in for a most unpleasant shock on the pension front.

    On the education front. It depends. But education (as opposed to teaching) should provide a platform for personal development – in more than one direction and as many possibilities for changing direction as needed.

    The key objective would be to provide all teenagers (who could benefit) with practical, theoretical and technical skills – so that they can earn incomes. Big challenge. Concentrate on how that income may be obtained (nature of employments) and you may have some hope.

    Quite unlikely. But one can always hope that hope will prevail.

  48. This is quite a good article

    http://www.irishtimes.com/business/economy/ireland/blinkered-thinking-at-the-heart-of-ireland-s-economic-crash-1.1439961

    “The study of history, including economic history and the history of economic thought, is still of paramount importance to avoid the excesses of those who believe the present is unique and the past of little relevance.”

    Imagine a future where there was a section in every bookshop devoted to WHY WW2 happened instead of a section devoted to the toys used in WW2.

  49. This extract from the link above deserves a place on billboards at the next election

    “Based on a detailed and analytical examination of all the available evidence, the book shows how Ireland experienced four crises – a property crisis, a banking crisis, a fiscal crisis and a financial crisis”

  50. @ Richard Fedigan

    “…I really don’t know who is addressing these issues realistically. Choices have to be made. And it may not be possible resource-wise to be ’successful’, in the global consumer products space and identifiably ‘Irish’ at the same time.”

    Your insights about realism in brandbuilding and carving out market positions in crowded food and drink markets are very interesting. As a simple businessman its not my field, but Mrs Owens has dealt with some of these issues at the sharp end for much of the last year and tells me that there is a huge opportunity for Irish food exports by capitalising on the theme of ‘sustainability’. This term is understood differently in Germanic countries and seen to include social and economic as well as environmental sustainability. Sustainably-manufactured products get decent margins in Germany provided the claims made are authentic and not just green-grass misty-isle marketing spin. The snag is that engineering sustainable food manufacturing businesses (in the German sense of the term) is hard work and can easily take decades.
    Despite that, given the great work done already in traceability and animal husbandry in Ireland, this ought to be achievable for some Irish volume producers and enable them to gradually build a high margin market position accompanied by worthwhile volumes.
    That’s on top of a thousand or so Irish producers of niche premium food/drink products who struggle to generate the volumes to justify the costs.

  51. @ Seafóid: That IT article? Its junk! It does not auger well for the book – despite the prominence of the two authors.

    This is NOT the sort of commentary we need. The authors come close in that para about what happens to contrary folk [vide: Morgan Kelly]. In Roman times they used Decimation – to encourage the others. We merely use Murder by Mass Media. Junk journalism is rampant.

    What we need is a Wiki-leaker who will publish the complete details of all those junk residential mortgages – from 1995 – 2000 and 2002 – 2007. And even now they are still at it. Then we will know who the real culprits are. But never otherwise.

  52. @BeeCeeTee

    “…it stretches credibility to think that another round of the same process will magically solve the problem”

    Indeed. However, I think many of the points on my ‘manifesto’ are non-trivial and would have in time profound effects. I would highlight:
    * No. 1 (rule of law)
    * No. 7 (invocation of state procurement from SME’s)
    * No. 11 (accurate corrective policy feedback)
    * No. 13 (quality apprenticeships that command the same respect and regard as university degrees)

    While I acknowledge many things have been tried over the years and have been dropped, gamed or compromised I think these measures have not been tried and are in fact essential. I would like them to be taken on board immediately for feasibility assessment as part of a new vision for Irish enterprise.

    We live in changed times. The prevailing BM may well be approaching its limits and evolution to a ‘fitter’ BM is needed – and will occur one way or another. A new vision for Irish enterprise is needed with some urgency.

    I think independent research needs to be urgently commissioned among a representative group of exporting or potentially-exporting SME proprietors and experienced entrepreneurs concerning the bottlenecks they see to rapid growth, and this to be interpreted and synthesised into a raft of policies. The people who lead this synthesis must be people with my sort of background, not (with all due respect) ‘non-combatant’ experts. Otherwise any new vision and related plans will fail.

    Without wishing to bang on about this any further, I must note that I don’t feel I personally have any influence whatsoever on state enterprise programme planning and have never been consulted about anything.

    If Minister Bruton’s office reads this (as I assume they will!) – can we please have an industry-led, evidence-based approach to the development of a new strategy for supporting indigenous exporting enterprise, to commence in Q4 this year and report in Q2 2014, which actually involves SME proprietors as key stakeholders.

    Thank you.

  53. @ Tony

    Mrs. Owens sounds like a very wise woman. Indeed she is right about the ‘huge opportunity’ for food exports meeting, for example, German standards of sustainability. You are right that ‘green-grass’, misty-isle, marketing spin does not meet these standards.

    And also about what and how long it would take it would take to engineer such businesses. It would also take a complete revolution in Irish agriculture. ‘Nuff said about that!

  54. @ seafóid

    Decided that I most certainly was not going to pay 43 euro for all the cut and paste stuff. Sat down and read it in Hoggis Figgis but learned absolutely nothing.

  55. @Tony,

    Your issue 1 – access to the law for SMEs – is not a “just do it” issue. Enterprise policy makers have been struggling with trying to drive down the cost of legal services for years. Broader law reform is a morass, but funny enough it tends not to be highlighted as a key issue by groups reviewing the environment for small business such as the Advisory Group for Small Business, which reported in 2011.

    Your issue 7 on reserving part of public procurement for SMEs has been a big issue in the design of public procurement policy for several years. Things are now as they are because of a balance intentionally struck by policy-makers that prioritises value for money and procurement efficiency over SME development. I think they have got the balance wrong, but I don’t believe that it is out of ignorance.

    I’m afraid that I don’t understand well enough what you mean in practical terms about your issue 11 (private versus public research) to comment.

    On your issue 13 on quality apprenticeships, the idea that we should reproduce the German or Danish apprenticeship system in Ireland has been knocking around for a long time, but it has always comes up against the reality that the Institute of Technology system does a satisfactory job of producing a lot of the skills that are produced through apprenticeships in these countries. That said, I believe the government’s advisory group on skills has recently proposed a new parallel industry-based track to qualifications in manufacturing.

  56. @BeeCeeTee

    Here are the affiliations of the members of the 2011 Advisory Group for Small Business:

    Barry Group
    Skip Trans and Chambers Ireland
    Small Firms Association
    Irish Hotels Federation
    ISME
    Buswells Hotel and Irish Hotels Federation
    Partners in Communication
    Enterprise Ireland
    Cork Chamber of Commerce and Chambers Ireland
    Forfás
    Martin Services (Industrial) Ltd. and SFA
    Mediateam
    Department of Jobs, Enterprise and Innovation
    County and City Enterprise Boards
    Certification Europe Ltd and ISME
    Credit Review Office

    Advisory Group for Small Business, Chaired by Minister John Perry, T.D.

    The Group was dominated by ‘non-combatants’ and organisations focused on the indigenous economy. Exporting product and services businesses are not properly represented. Therefore this is not the authentic “voice of small business”.
    No field research among SME’s appears to have been undertaken and the report appears to be a blend of desk research and the opinions of the committee members.
    While many of the observations made are important and relevant it is hardly surprising if underlying issues such as the poor legal environment and low levels of innovation are not highlighted. This sort of initiative is not up to the mark. Independent research is required among representative samples of SME’s not well-intentioned talking shops dominated by public servants.

    ‘Just do it’ does not imply I think improving the legal environment is easy, especially in a country with a high levels of commercial law practice in its leading firms focused on FDI business services, making it difficult to source capable talent at a price point accessible to SME’s. Rather, I meant a solution is required, however this is to be done.

  57. @Tony,
    Perhaps you have hit on an issue that has slipped through the cracks in enterprise policy there. If you want to pursue it further, you could hawk it around the representative organisations, the Law Reform Commission, the enterprise agencies and the National Competitiveness Council. Ministers Shatter or Bruton might bite. For a statistic you can point to: the WEF rates Ireland as 29th in the world on “Efficiency of legal framework in settling disputes”, which is better than average but much worse than Britain, and worse than most other developed countries with which we share a legal tradition.

  58. @BCT

    Thanks for the build on this.

    There are many Irish enterprise policies supposedly aimed at supporting SME’s that are neither ‘industry-led’ nor ‘evidence-based’. Busy SME promoters dont really have time to lobby and plead for change and I’m far from sure that this is the ideal way to shape policy.

    Your earlier point about root causes of three decades of less-than-ideal results in supporting indigenous SME’s needs proper investigation – but not Telesis style. I cant think of a single way of establishing such work in Ireland that has not been attempted and failed, in most cases due to incompetent stewardship. On that slightly sour note lets drop the discussion for now.

    If DJEI wants to explore these issues further I’d be happy to discuss them.

  59. @ Richard Fedigan

    “I’ve repeated, ad nauseam, that while, for example, there may be ( somewhat) significant exports of Irish beef to this market ( France), these exports are NOT identifiable to French consumers as ‘Irish’ in any shape or form.’

    I see Irish steak for sale in Swiss supermarkets at 119 CHF per kilo (around 100 Euro) and it’s clearly marked as premium and Irish.

    http://www.youtube.com/watch?v=1J6RQ4dpPAU

    There’s loads of money to be made with quality products , “bio” if possible, in high end segments. Ireland could a lot more in terms of marketing its advantages.

    Margins are excellent.

  60. To the best of my recollection, the approach to Country-of-Origin branding of Irish beef in France is driven by French consumer preferences. On average, they tend to feel more strongly than people from other major markets about buying local and national. At the same time, French farmers produce more of the beef needed within the country than is the case in some other major markets, so it is possible to buy local/national. Also, a lot of this meat is grass-fed, so the relative value proposition of Irish meat is weaker than when competing agaianst grain fed beef. As a consequence, it is not always beneficial to emphasise the Irish origin of our beef to French consumers.

  61. @BeeCeeTee

    Indeed. Go to the top of the class. So when we hear politicians and representatives of some government departments, semi-states and representation organisations talking about the stellar reputation of Irish beef in the eyes of the global consumer, what markets are they referring to?

  62. @Richard,
    There’s always a lot of spin in these pronouncements, but I’m pretty sure that I have heard of Country-of-Origin branding of Irish beef being undertaken in some other European markets. Other than Germany (see below) I can’t remember which for sure, but I think it has been at least tried in Britain, Netherlands, Italy and Japan. Seafoid has mentioned Switzerland, but my guess is that the volumes are low.

    I think that the following quote on meat promotion from the most recent Bord Bia Annual Report is relevant.

    “Promotion
    Bord Bia’s beef marketing strategy is one of differentiation and premiumisation of Irish beef by assisting industry target the best customers across Europe.
    Since 2007, we have seen a doubling of the volume of Irish beef going to
    premium retail and foodservice and a rise of 15% in the volumes destined
    for standard retail lines. This equates to over 50,000 tonnes going to better
    paying outlets.

    The Food Harvest 2020 Beef Implementation Group identified a 40% potential growth in the output value of the beef sector by 2020. Marketing targets in developing this goal include:
    • Extending the Bord Bia Strategy of differentiation and premiumisation to 2020.
    • Positioning Irish grass-fed beef as a premium product in high-value European markets and international markets such as the US.
    • Developing the positive environmental, human health and animal welfare attributes of grass fed beef into marketing opportunities and building environmental criteria into quality schemes.
    • Developing international markets for beef.

    Among the initiatives being implemented to achieve the above targets are:
    • Supporting premium beef brands.
    • Premium image building via chefs and media in flagship regions.
    • Positioning Irish beef at the top of the German market.
    • Branding Ireland’s sustainability advantage.
    • Developing a market for sustainable suckler beef.
    • Maximising market access.”

  63. @BeeCeeTee

    You’re a trier. I’ll give you that. Can’t believe you took the time to type the Bord Bia brochure.

    Without exposing you the shock of meeting a German meat Category Manager working with say ( retailers) Metro, Rewe, Globus or Tengelmann and in basic marketing terms, promotion is not strategy, retail and food service are completely different target markets, requiring different strategies, branding Irelands’ sustainability advantage is not the same as actually having a sustainability advantage, certainly not a ‘bio’ advantage, ( ask Tony Owen’s wife!) and, at this point the ‘developing’ has been going on for 40 years.

    Absolutely nothing wrong with selling good, grass-fed beef under retail brands overseas but let’s stop advocating consumer marketing strategies, ( ‘origin’ labels alone are not a consumer marketing strategy!) particularly in sophisticated consumer markets if we don’t have companies with the resources ( or willingness) to do so.

    Picking one item from your list: ‘supporting premium beef brands’. In Germany? Which ones? In which retailer? Where? Investing how much? In what? Brand marketing stategies may, in fact, NOT be appropriate for irish beef. In the meantime, let’s stop pretending global consumers love irish beef!

Comments are closed.