In the last edition of Finance this year, decade, century and millennium, we have decided to re-print an excellent article by Professor Louis Cullen of the Department of Modern History in Trinity College, Dublin on 1,000 years of finance. Originally published to mark the Dublin millennium in 1998, Professor Cullen has updated and expanded the article at the end of the century.
Professor Cullen reminds us of finance and money as far back as 1,000 years ago, and we can marvel at the changes since then. The changes in the country as a whole, and in finance and financial services, have been dramatic enough since 1987 when Finance was first published. No-one would have predicted the level of economic growth in the 1990s. No-one would have said we would have joined the euro as a founder member, and without the UK being in too. No-one expected the extent of the success of the international financial services centre in Dublin - and now Ireland. No-one predicted the rapid increase in the sophistication of finance throughout the economy, from integrated finance functions in multinationals and shared services centres to top level corporate finance, private client investor services and the trading desks in the IFSC.
There are two major themes affecting the future of finance and financial services in Ireland. First, there is the national economic policy in the euro context, determining whether recent success is sustained or will be seen later as a short-lived, once-off, after-burner boost. Second, there is the combined impact of international competitive pressures, including the affects of the internet. While the latter is capable of affecting the way of doing business of each and every finance specialist in the country, the former sets fundamentally the environment in which our businesses can exist and thrive. These are themes which Finance will keep top of its agenda in the coming year.
Budget
As far as economic policy is concerned, this month's budget presented by Charlie McCreevy signals a commitment to a low personal and corporation tax environment. In the budget, Mr McCreevy focused his desire for radical change on personal tax and has drawn fire for this.
On the corporation tax side, media speculation about an attack on banks in the budget by means of clawbacks from the 12.5 per cent rate proved completely unfounded. The concept of clawbacks is not new; nor is the reality of their incompatibility with EU rules. The Minister has at least shown that tax policy is not aimed at punishing particular sectors, fortunately.
It remains to be seen how clawbacks from the 12.5 per cent rate, the type of income they will apply to and dividend withholding tax will figure in the 2000 Finance Bill. This is where the real action will be on corporation tax. There was little mention of corporation tax in the budget, other than welcome confirmation of the progress down towards 12.5 per cent (the rate will be 24 per cent as of 1 January next). This does not mean that these issues will not figure in the Finance Bill - almost certainly, they will, for good or for ill.
E-finance
The impact of the internet - a term which may disappear as redundant because of its pervasiveness, as well pointed out by a Financial Times columnist - will be felt on finance departments and treasuries as well as retail financial services. The rapid transmission of data is not new for major companies. What is new is the distribution of this capability among all actors, customers, suppliers, employees, shareholders, regulators. We do not know what the outcome will be, and indeed, there will be no one time when that outcome is finally clear. It is a process. The pace of change will not abate. Some tough strategic choices will have to be made along the way by those businesses which are most threatened by the e-revolution, and no less so in financial services.
Whatever happens in the competitive environment, as in policy, there will always be a need for judgement. The internet does not change the need for financial as well as general business judgement. At a micro level, for example, the internet is not providing any substitution for 'calls' on markets which have to be made by corporate treasurers. In this month's edition, we follow what is now a tradition of asking the winners of the Irish Association of Corporate Treasurers awards to describe their best calls of the year. These give interesting insights into the mind and the choices of some of the best dealers in the country.
New Year - New Finance
As you will be aware from our recent readership survey, we have been planning a re-design of Finance to coincide with the new millennium and the rapid changes in finance and financial services. This is the last edition of Finance in the present, A4 magazine format. From January 2000, Finance will be in a larger format, on select Italian paper, with an excellent, classical design organised with Boyle Design Associates. It will still be published monthly.
The content will be key, of course. Finance will have a news-orientation, together with features, analysis, education and opinion on finance and financial services. It will reflect the growing sophistication of the finance and financial services in Ireland. It will anticipate changes arising from the use of the internet and, for example, the re-definition of the IFSC. For us, it is an exciting new development; we hope you will agree. Happy Christmas. |
