Friday, June 27, 2014

Retail Sales are going nowhere (but up on last year)

The May update of the CSO’s Retail Sales Index doesn’t show a whole lot of movement.  The May readings (though provisional) of both the value and volume for the series of the index excluding motor trades are almost exactly the same as those recorded six months ago in December 2013.  There has been some fluctuation in the interim but there has been no overall positive or negative movement in the past six months.

RSI Ex Motors to May 14

It can be seen that both series are ahead of where they were in the first half of 2013.  Thus the annual changes paint a slightly healthier picture.  The recent annual increases are the fastest since early 2008 and are only matched by those that were seen around the time of the temporary fillip that resulted from the ‘digital switchover’ of the broadcast television signal in October 2012.

Annual Change in RSI to May 14

However, unless there are increases over the coming months to match those seen towards the end of 2013 the annual changes will reduce to zero.  Still, on the goods side at least, we are likely to see an annual increase in Consumption Expenditure for H1 2014 compared to H1 2013.

The monthly changes again highlight that it is difficult to read anything into changes over a short timeframe given the volatility in the series.

Monthly Change in RSI to May 14

Overall, retail sales are ahead of where they were this time last year but the growth of the final few months of 2013 has not continued into 2014.

Friday, June 13, 2014

The EU has made a negative state aid judgement against Ireland’s Corporation Tax regime

The announcement this week is not the first time the calculation of the tax base for Ireland’s Corporation Tax has appeared on the radar of the EU’s state aid rules.  There was a previous formal investigation launched by the  EU in 2001 and it concluded in 2003 with a negative state aid ruling against Ireland.  Unlike now though the Ireland was not under the glare of international scrutiny and condemnation.

The case related to an exemption from Irish Corporation Tax for foreign income of Irish resident companies and branches if that income was used for investment and job creation in Ireland.  It was introduced in 1988 when the top rate of Corporation Tax was 40 per cent so there would have companies who would have benefitted if the tax rate in the source country of their foreign income was less than the Irish rate.  Of course, Ireland’s dual system of Corporation Tax fell foul of EU rules and the top was rate reduced significantly until the single rate of 12.5 per cent was introduced in 2003.

When the rate fell to 12.5 per cent the exemption of foreign income under investigation was almost obsolete as the tax rate in the source country for Irish companies’ foreign income was almost certainly to be greater than 12.5 per cent.

Anyway, the EU did undertake an informal information gathering exercise and subsequently proceeded with a formal investigation and concluded that the exemption was state aid.  The companies who benefitted from the state aid were not asked to make redress payments and by the time the final decision was reached the exemption was obsolete and only one part of it remained (and that had been closed off to new entrants in 2001).

Some details of the case can be accessed from here.  The quickest summary is in the press release rather than the judgements.

Friday, June 6, 2014

Back in the A Class

Standard and Poors have upgraded Irish government bonds from BBB to A- with positive outlook.  Their statement justifying the upgrade is below the fold.

10-year yield drops to 2.48%

Two point four eight.  Really?

Bond Yields 10yr 06-06-14

It seems so.