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Budget 2005 and keeping lean Back  
Jack Welch, the legendary ex CEO of GE nowadays plys his trade these days on the conference circuit, giving corporate pep talks to Fortune 500 leaders on what best to do in the environment of the mid 2000s, and he is still packing them in. His advice at present – in response to the question of what to do with costs – is cut them 30-40 per cent, because anything less won’t keep us competitive with Asia.

For Ireland plc, similar advice applies. According to the Economist magazine, in its twentieth anniversary ‘The Year in 2006’ book, Ireland is exceeded in income per capita in the world by only two countries – Switzerland and Norway, and if this year’s forecast comes off, it will only be exceeded by Norway.

While one may quibble about the validity of income measures such as GDP per capita, there is no question that Ireland is now a very rich economy. This has been a bit of a puzzle, as when the Economist began publishing its comparative income statistics 20 years ago, Ireland languished at the bottom of the EU tables, changing position year by year with Greece, Portugal and Spain, who today record income levels of just a third of Ireland’s. Why the transformation ? – are we that much cleverer, or hard working? Not likely, and, while we do work a bit harder, given our tax incentives, we certainly don’t work three times harder. The real reason of course is tax, and our low tax regime. A telling statistic was released to the Wall Street Journal last month to the effect that Microsoft paid $325 million in corporation tax in Ireland last year. Add another fifty or so corporate heavyweights to this, and we can appreciate just how dependent, and vulnerable, the Irish economy is to the attractive tax structure we have developed in this country.

In articles in this month’s issue – one by the winner of this year’s accolade for ‘Best Research Economist’ in the 2005 FINANCE Stockbroking Survey, Robbie Kelleher, and by Brian Daly Editor of the KPMG Tax Monitor (pages 8 and 9), the balance of Ireland’s corporate tax structure in international context is analysed. Both writers conclude that while there are many siren calls that if heeded would throw our finely tuned system into crisis, the balance of sound finance and a good balance between social needs and an incentivised economy should be maintained. The threat of more demands (from Benchmarking II) from an already over compensated public sector (when pensions and job security are taken into account) must likewise be averted – because it is the Trojan horse of a poorly managed public sector, sustained by the drug of taxpayers’ money, that threatens to make Ireland uncompetitive again in international markets, just as it was before the Celtic Tiger was ever heard of.

Stockbroking Survey 2005
Our eighteenth annual Finance Magazine Stockbroking Survey sees a sector still in rude health, despite forecasts over the years of the survey’s history that an independent Irish stockbroking industry might fade away in the context of a pan European equity market, dominated by big global houses. While the voting universe of the survey has changed radically – over 1,000 individual fund managers were nominated for this year’s survey - the survey is now as much conducted amongst international, global fund managers as amongst Irish – and as the scope of it has evolved, the vigour of the sector has remained. This is a tribute to the innovation of the industry, and the willingness of stockbrokers to get out into the wide world of asset management to sell their story. It is no coincidence that the Survey this year shows that those who have done best were those who have shown most innovation, fresh thinking, and have been prepared to get out there and market their stories. That’s not a new formula, and it is reassuring that in the changing complexity of the finance industry that such solid traditional business values still hold good.

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