| New year, new currency |
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With this issue of FINANCE being the first in phase II of European Monetary Union - the implementation phase -it is natural that the euro, now the national currency of Ireland, should dominate our coverage. The hard task of implementation still lies ahead, and there are big costs, in time, headaches, and effort. However, there will be big rewards for corporates, not least the dawning of a new era of risk management that in the old days of limited national currencies in Europe could be imagined only.
Small illiquid markets, and there were few as small and as illiquid as the Irish pound market, invited ingenuity, as the briefly popular Irish pound ‘hedge’ market illustrated (an episode in the life of the Irish pound recalled in this issue by Sean Grace, in his article as incoming president of the IACT on page 15).
But ingenuity of a kind that really provided people with the precisely focused solutions they wanted or needed were all too rarely available, simply because the market was not there to support the idea.
Now, with our fledgling euro currency market, with its unaccustomed depth, the range of options that will be available are very exciting. FINANCE will, accordingly, have more to explore than ever in the new euro environment opening up for Irish corporates.
Treasury is not the only aspect of the euro, of course, although it features strongly in this issue, notably with a number of articles on the nuts and bolts of the new ECB and euro money markets, by Dermot Hardy of FTI on page 8, and Patrick O’Sullivan of AIB on page 30.
Just in case you have been in the ‘wait and see camp’, like many companies, and have postponed your really strategic decisions, there is no time like the present to begin really getting to grips with the real decisions to be made on euro implementation. On page 17 we review a series of major publications available from the ‘Big Five’ accountancy firms to help guide your way through the process.
One by-product of the euro is the disappearance of monetary policy as a feature of national economic policy. This leaves fiscal, and tax matters even more important than ever - note the rise of fraught debates on the issue of tax harmonisation in Europe - coinciding with the approach of the euro.
Thus tax for the Irish economy becomes even more important than ever. It is therefore even more important than ever that tax policy is got right, and on that front, the Budget speech of last month raises a number of questions that are a cause for concern. Pat O’Brien and a number of his colleagues in the KPMG Tax Monitor (on page 27) rightly focuses in on a range of these concerns, as does Gearoid Griffin of PricewaterhouseCoopers in his post Budget analysis on page 6. Certainly the possibility (if possibility it is) that the Minister is signalling moves to negate the effect of the corporation tax reductions through the backdoor through a traded income surcharge is alarming to those who have taken satisfaction, and some justifiable national pride indeed, in the stance adopted by the Government on the corporation tax issue in the EU. Of concern, too, is the implication of the move towards standard rating (coinciding with the maintenance of penal marginal rates of tax - of over 50 p.c. effectively) , and the possibility, suggested in the KPMG Tax Monitor, that this over time could have the result of making taxation an
issue of little relevance to an increasing percentage of the electorate. |
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| Article appeared in the January 1999 issue.
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