19/10/2014: IFSC: Down, Down and Down It Goes...

This data has been crowding my desktop for some time now, so might as well post it. In September this year, the new rankings of Global Financial Centres (http://www.longfinance.net/images/GFCI16_22September2014.pdf) came out for the second half of 2014. Dublin slipped to a rather less than honourable 70th place, down 4 ranks from march 2014 and 14 ranks from September 2013.

Here's the chart showing the sorry state of decline in Irish Financial Services prime centre in global position (these are primarily IFSC-linked):

So may be, just may be, having the chair of IFSC going around talking about everything political and EU is not exactly what drives excellence in the international financial services? Any ideas?..

19/10/2014: Dublin: Just 24th in the Global Centres for Talent Rankings

You know the mythology: despite 55% upper marginal tax rate in exchange for nearly zilch in public services, despite the need to pay consultants' fees and private insurance just to get basic medical care, and despite the fact that childcare runs a cost of the second mortgage, Dublin (nay, rest of Ireland too) is a great location for human capital-rich expats, especially if they command high salaries...

And now, we have:

Dublin ranks 24th in the world amongst the locations 'most appealing' for expats.

Never mind, we already have the best educated workforce in the world, so be jealous you London, NYC, Paris, and all the rest of ye in the 23-losers lot.

Source: http://www.citylab.com/work/2014/10/the-new-global-centers-for-talent/381487/

19/10/2014: Chart of the Week: Japanising Europe

A chart of the week, courtesy of @Schuldensuehner

10 year benchmark bonds: Japan for 1987-2004 period of decline and stagnation and Germany for 2004-present period of decline and ... oh, well... Japanisation of Europe is still ongoing, but it goes without saying: lower yields are not conducive to economic recovery. Or as @Schuldensuehner  noted:

Everything is going according to script...

Now, check out why Germany's lower borrowing costs mean preciously nothing when it comes to the hopes of Keynesianistas around the world for more German borrowing: http://trueeconomics.blogspot.ie/2014/10/13102014-germany-too-old-to-read-paul.html

19/10/2014: A New Cold War is a Bilateral Culpability

A well-balanced review of history that has led Russia and the West to the current confrontation: http://www.ecfr.eu/content/entry/commentary_the_origins_of_russias_new_conflict_with_the_west330

Select quotes:

"In Putin’s world national “sovereignty” is a central principle – but just a few countries can claim sovereignty and, therefore, have the right to a sphere of influence. Russia is one of those chosen few – historically, and because Putin stands ready to fight for his nation’s sovereignty in a world where Might means Right."

"In the twenty-first century, the West responded, all nations are equal and each country is sovereign. This sounds like a wonderful world – except that this does not seem to be the world of the US-led policy of humanitarian intervention, peace enforcement, taking sides in other nations’ domestic conflicts, and killing the forces for evil on behalf of the forces for good. Putin saw this as an argument that his world of Might means Right was real: America could pursue such policies because it was powerful and sovereign."

"The current confrontation between Russia and the West is a move back to a cold war design: Russia as “another world” isolated by the US-led West. Russia’s world today is limited to just itself with no socialist camp around it, and the West has the potential of pushing Russia deeper into a crisis, both economic and political. Unlike the Soviet meltdown that had numerous internal causes, but is blamed on the West by Russian conspiracy theorists, this crisis will truly be precipitated by the West."

19/10/2014: Of National Accounts and Ministerial Declarations

Here's an interesting take on the role of ESA2010 reclassifications on Euro area growth: http://euobserver.com/news/126110. Strangely, this topic is rarely discussed in Ireland which switched to ESA2010 standards ahead of majority of other countries.

And here's an illustration of the claim by Minister Noonan (made in his Budget 2015 speech) that Irish farming is a EUR26 billion sector:

Somewhere else, someone is producing EUR20 billion worth of 'farming' activity that Minister Noonan knows of... Maybe he or they can point us in that direction. But the above figures include much more than 'farming':

And the above figures include double-counting too, since they come from two different sides of the National Accounts (some of exports are in the Sector Output at factor cost). And they include net subsidies of some EUR1.5 billion (see http://trueeconomics.blogspot.ie/2014/10/7102014-subsidies-rained-on-irish.html) which no one, save possibly an Irish Minister, can describe as 'activity'. 

18/10/2014: Irish Economy: The State of Recovery

Yesterday I had a chance to speak about the state of the Irish economy at a breakfast briefing hosted by Invesco. Here are my speaking notes (slightly edited).

Where Ireland is today?

1. There is a recovery
2. The recovery is still fragile & highly uneven
3. Risks to the downside of the recovery continue to weigh heavily: external (international risks) and internal (domestic and structural risks)

There are three ‘Irelands’ today co-sharing this economy.

Ireland of ‘haves’ 

• Demographically old       
• Benefited from asset bubble of the 2000s
• Debt-free and secure in income
• This Ireland is growing in numbers, but not in terms of value added in the economy: 52,200 more in retirement today than in H1 2011 (+17.9% on H1 2011)
• This generation no longer saves to invest and is consuming lower value-added goods and services, which are lower in growth intensity

Ireland of ‘hopes’

• Demographically young (20-29 years of age)
• Unencumbered by debt, but assets and credit-poor
• Income is low, generating little surplus savings to invest, but
• Generating economic growth and value added, as well as strong consumption in entertainment and non-durable consumables
• Held back by ageing workforce at the top of career ladders and by lack of jobs in the 'normal' (ex-ICT and specialist skills) economy
• Emigrating for better career opportunities: population of this cohort in Ireland has declined 112,200 since 2011.

Ireland of ‘left-outs’

• Encumbered by legacy debt, 
• Unemployed or in low jobs security and 
• Hit by high taxes and cost of living
• Hit by pensions insecurity and investments values collapse
• Demographically in their prime productive age: 35-49 years
• This cohort is growing over time even if immediate arrears on mortgages are declining

What do we see on the ground in this economy? 

Growth:

• GDP at constant factor cost is up 5.37% y/y in H 2014, but only 3.72% on H1 2011.
• Due to a number of factors impacting changes in the ways that MNCs book profits into and out of Ireland, GNP rose 6% y/y in H1 2014 and is up 8.2% on H1 2011. Again, very strong.
• Taxes in the economy are up 11.5% on H1 2011 and 8.1% on H1 2013. The Governments took EUR11.7 billion in income-related taxes increases since Budget 2009.
• Much of recorded growth in 2014 is coming from the sources that have little tangible connection to reality: reclassifications of R&D activities, MNCs, etc.

Year on year, growth is concentrated in:

• Agriculture (at 11.9% y/y or 2.2 times the rate of overall growth). Large part of this is down to price effects;
• Distribution, Transport, Communications and Software (+10.9% y/y or double the rate of growth overall);
• Building and Construction (+8.3% y/y growth or 1.5 times rate of overall expansion); much of this is down to timing of tax incentives, as well as changes in regulations;
• Public Administration & Defense (+3.7% y/y) as we are witnessing massive shift toward charging for public services and paying interest on debt. In 2015, Interest on Government debt will amount to EUR8.5 billion, more than 1.8 times greater than the projected Corporation Tax take.
• ‘Other Services, including Rent’ (+3.3% y/y)

Much weaker growth was recorded in

• Industry overall (+0.6% y/y) and especially in Transportable Goods Industries and Utilities (+0.16% y/y)

In terms of demand side of the economy:

• Fabled return of consumers is quite overhyped for now: Personal Consumption is up only 1.2% y/y in H1 2014 and is still down 2.7% on H1 2011. Value of core retail sales rose only 0.28% in 3mo through August 2014 compared to 3mo through May 2014. Volume rose 0.29%. This is hardly a ‘boom’.
• Meanwhile, net current expenditure by the Government is up 5.2% y/y in H1 2014 and is basically flat (-0.2%) on H1 2011. Austerity on the spending side of Government has been a transfer of payments from services to national debt funding.
• Gross Fixed Capital Formation is up massive 11.3% y/y in H1 2014 and is up 2.3% on H1 2011, but most of the uplift is down to resale of properties. This also includes buying activities by the vulture funds. 

External Trade is booming – despite tough external economic conditions:

• Exports of goods were up 13.2% y/y in H1 2014 and are up 9.6% on H1 2011
• Exports of services up 7.1% y/y in H1 2014 and 24.6% on H1 2011
• Problem is: national accounts data is now in a total disconnect from the actual trade data. In the past, average discrepancy was around EUR1 billion per quarter. Now we are witnessing National Accounts exceeding trade data statistics by 7 billion. So quality of data is starting to look wobbly.
• Strong support for our exports is provided by our traditional exposure to the US and UK markets. But we are also seeing encouragingly strong performance in some new markets, e.g. Russia and China, again against the general trend toward slower demand in these economies.

What we do know about the domestic economy is still quite troubling:

1. Debt: 165,674 accounts in arrears in Q2 2014 – EUR33.6 billion in balances. Restructured: 125,763 accounts of which 48,862 are still in arrears. Total mortgages at risk of arrears or in default: 256,146 with balances of EUR46.06 billion. Over 50% of all ‘permanently restructured’ mortgages involve same or higher levels of life-cycle debt. 39% of all ‘permanently restructured’ mortgages are back in arrears, absent any significant shocks to interest rates, inflation or incomes.
2. Income: In real (inflation-adjusted) terms, Irish GDP per capita in 2014 is expected to be 11.9% lower than pre-crisis peak. This is the third worst performance in the Euro Area (after Cyprus and Greece). Lack of income uplift means that households’ deposits are trending slightly down in recent months. Labour force participation rate fell in Q2 2014 and at 60% is below the historical average of 60.8%. Which suggests that a large part of declines in unemployment is accounted for by people simply dropping out of the labour force.
3. Tax system: In 2006, Income tax and levies accounted for 27.2% of our total tax burden, while Corporation Tax accounted for 14.7%. This year, Income Tax + Levies will account for 41.9% and Corporation Tax for 11%. In 2015, based on Budget 2015 estimates, Income Tax burden of funding the state will be 42.5% and Corporation Tax burden will be 10.8%. In simple terms, at the peak of the 1980s crisis, Income Tax and Levies burden was 41.8% average for 1984-1989 period. Budget 2015-costed income tax and USC changes total EUR478 million in ‘stimulus’ to the economy. Yet, Budget 2015 for HSE includes EUR330 million of undefined “one-off revenue enhancements” (aka tax on services) and Irish Water is expected to extract EUR175-190 million out of economy net  of tax credits. Which implies that Budget 2015 will still draw money out households.
4. Entrepreneurship and investment: There is no significant growth in entrepreneurship, despite the claims of rising number of companies registrations. In reality, companies registrations numbers tell us little about entrepreneurship as we do not know if these are new enterprises or old ones that were forced to shut down by the crisis re-registering once again. We do not know how many of the new companies are being registered by spinning off existent companies functions to avail of 3-year tax exemption. In a number of sectors, there are now multiple enterprises trading from the same business platform. What we do know, however, is that Budget 2015 contained virtually zero cost-linked measures for business development or entrepreneurship supports. 3 year relief for start-up companies is costed in the Budget at EUR2 million for the Full Year, which, applying 12.5% tax rate implies profit run rate of EUR16 million or revenues / turnover of around EUR64-80 million for start ups launched 2013-2015. This is ridiculously low for an allegedly thriving ‘Entrepreneurial Culture’. Meanwhile, on supports side, Budget 2015 contained 11 measures to support agriculture, with largest measures aimed at supporting incomes from leases on unproductive land ownership. Worse, the starting point for much of entrepreneurship is self-employment. Budget 2015 literally pushed higher earning self-employed (those with higher investments in human capital, skills, knowledge, etc) over the cliff with new USC changes. The Government policy is now to actively pursue, hunt down and kill off anyone who is standing on their own, takes risks and creates own value added.
5. Innovation and R&D: Just three MNCs operating from Ireland account for 70% of all R&D activity here measured by patent filings: Accenture – 31%, Covidien – 24% and Seagate – 15%. In more recent data, foreign companies filings in Ireland have continued to outstrip Irish companies filings by a factor of 3:1. Ireland operates a large number of public intervention and support schemes to increase R&D and Innovation share of our economy. Yet there is not a single, coherent, comprehensive data reporting channel on what these schemes achieve on the ground. It appears that in this country, more knowledge and innovation is a pursuit best managed in the fog of obscured accountability.

On the net, the state of play in the Irish economy is that of a gentle uplift in the domestic economy with risks weighted to the downside.

• This is a fragile (due to risks) recovery on the ground, despite the fact that aggregate numbers are trumpeting the rise of the Celtic Phoenix. For now, there’s a lot of smoke, some strong wings flapping, but not a hell of a lot of flying, yet.
• Global risks are weighting growth prospects to the downside too, but Ireland is clearly benefiting from three idiosyncratic sources of strength:

1. We are benefitting from stronger demand in the US and the UK; and
2. Our indigenous exports, small as they might be, are performing well – a testament to longer-term relationships built by Irish exporters around the world.
3. Finally, the sheer scale of collapse in the economy during the crisis means we should expect a more robust bounce up. 

We can expect:

• Robust aggregate growth figures in 2014 (ca 4.1% on GDP side and 4.7% on GDP side or higher, depending on what and how is going to be booked into Ireland by the MNCs) and weaker, but still substantial growth of 3.0-3.6% on GNP side and 3.5-3.9% on GDP side in 2015.
• Slower growth is expected to result in continued weakening in employment growth: in 2011 we posted 2.3% growth, in 2014 we are likely to post 1.8% growth and in 2015 – closer to 1.5-1.6%. The risk here is to the downside.
• Consumption growth is probably going to be around 2-2.5% in 2015 after 1.5-1.7% rise in 2014.
• Investment will slowdown from 2014 estimated growth of 14.5-15% to 10-12% in 2015. Again, risk here is to the downside, should Budget 2015 changes on property side induce early purchases rush in the remaining months of 2014. Big unknown for 2015 is the rate of foreclosures on arrears-ridden properties. This can derail the recovery altogether and significantly depress sentiment in the economy. 

All in, 2015 is expected to be another year of recovery, amidst risky trading environments.  And 2015 recovery is going to be a bit more balanced.

The key risks, however, are now being shifted to 2016 – the year of more aggressive tapering by the Fed and the expected start of the monetary tightening cycle in the euro area.  Before then, accommodative policies by the ECB will keep rolling in, although their effects on growth will be most felt probably in H1 2015.

Still, for now at least, the theme of ‘fighting for survival’ that characterised the Irish economy in 2008-2013 is over and we have some hopes that the new theme of ‘fighting for growth’ is commencing.

18/10/2014: Latest news on Russian economy

In the week this was, much of my attention was on Irish economy (given the Budget 2015 shower of news), so here's a quick catch up on Russian economy news.

Fresh off the printing press, Moody's downgraded Russia credit ratings from Baa1 to Baa2. Per Moody's moody grumblings: "The first driver for the downgrade ...relates to the longer term damage the already weak Russian economy is likely to incur as a result of the ongoing crisis in Ukraine and, relatedly, the additional sanctions imposed against Russia." More bad news: the agency is maintaining Russia's outlook at "negative".

Let's face the music: so far in October, Russian Central Bank spent some USD13.5 billion in a futile attempt to hold ruble from sliding against USD and the euro. This is not good news as it signals three things:

1. Flood of capital out of Russia continues and seems to have resumed with renewed strength in last 30-45 days after a brief slowdown in May-August.
2. The combined effects of (a) general outflow of funds from Emerging Markets, (b) falling exports revenues on foot of collapsing prices of oil, © building of arrears against some importers of Russian gas (actually that would be Ukraine alone), (d) general volatility in the global markets, and (e) rumours of capital controls and deteriorating business climate in Russia, including in the shadow of the Russian banks facing pressures from the EU and US funding markets shutdown and talks of SWIFT disconnection, all are now acting to reinforce the adverse effects of the geopolitical mess in the Ukraine. [Note: here's the latest on SWIFT saga: http://www.themoscowtimes.com/business/article/sanctioned-russian-banks-seek-alternative-to-swift/509345.html]
3. There is now political economy kicking into high gear when it comes to ruble valuations: after  continued depreciation of the ruble against all major currencies stretching over some 12 months, we are starting to see some serious concerns in both the Central Bank and the Kremlin that more devaluations will be translating into serious pain on the ground for ordinary consumers.

Chart below (via Bofit) to illustrate the degree of interventions and associated exchange rates:

On the above point (2): Bofit reports that "Russian banks repatriated a record high amount of their assets from abroad in order to balance their forex positions as Russian firms and households reduced their domestic forex deposit accounts with Russian banks. ...Russia’s large state banks repatriated assets from abroad also in case there was an as-set freeze. Net borrowing of banks from abroad was strongly, and to an unusual degree, negative." In other words, banks were repaying foreign loans much more aggressively than rolling them over. Corporate capital outflows rose big time in Q3. This was driven by liabilities flows, which became negative in Q3 as companies aggressively paid down foreign debt and received virtually no new debt from abroad. It is worth noting that official capital outflows include not only funds expatriated abroad, but also private (corporate and household) funds converted into foreign currency, even if these funds never leave Russia.

And on the above point (2)(d), two weeks ago the rumours were so strong that the Central Bank of Russia had to issue a note denying the capital controls were under consideration.

The general sentiment in the EM asset markets is that of a heavy risk-reweighting in the mature economies pushing massive outflows of funds from the EMs. Risk-off sentiment is certainly on this week across global markets. Ongoing volatility is high and rising and signals general nervousness in the global markets. This is fuelling a strong sell-off in risky assets, especially in the EMs. Addicted to endless increases in liquidity supply, the markets are clearly waiting for the Central Banks to open the taps once again. Absent such action, there is no fundamental reason for current asset valuations in any region in the world.

Ruble is getting hammered, with the largest catalyst for change being oil prices. Currently RUB/EUR is at 52.3 and RUB/USD is at 40.8. Two weeks ago, we had RUB/EUR at 50.5 and RUB/USD at 39.6. Month ago: RUB/EUR at 48.4 and RUB/USD at 36.8. Ugly!

In the short run, I can see both rates rise by around 5 percent (3mo outlook) and at 12 months horizon, my expectation would be for RUB/EUR is at 54.0-55.0 and RUB/USD is at 43.0-44.2.

With ruble plunging, imports are also falling off the cliff. Latest data from the Central Bank show Q3 2014 current account surplus hitting another 2 year high. Over 12 months through September 2014, Russian current account surplus averaged almost 3% of GDP. Goods trade surplus has been running at nearly 10% of GDP. This is despite a small decline in exports of goods and services in Q1 and Q3 2014 and virtually zero growth in exports in over 2 years. In contrast, imports fell 6-7% y/y in the first 9 months of 2014 and in Q3 2014. Goods imports declined 8%. Chart below (courtesy of Bofit) illustrates:

On the net, current account position is still strong, but trending around post-crisis levels. Lower oil prices should significantly harm this, especially as supports from imports declines start to wear out over time.

16/10/2014: Euro Area Industrial Production Losing Momentum... What Momentum?..

A nice chart from Pictet, graphing industrial production in the US against the Euro area:

Everyone is talking about 'fading momentum' in euro area industrial production... my view: what 'fading momentum'? Euro area industrial output has been on a declining trend for more than 36 months now. The 'recovery' from Q1 2013 through Q1 2014 was a blip - so weak in any 'momentum' it is not worth mentioning.

The chart basically shows no gains on output in the sector for the euro area since 2000-2003 averages. If there was any 'momentum' in the series before the last couple of months, would anyone please point it out?

16/10/2014: Ireland's Real Recovery Metrics: Try Avoiding that Over-Confidence Trap

So 7 years into the crisis, and Ireland is 'securing' the 'robust recovery' according to the Government. Securing? Well, here's the chart based on IMF latest projections for real GDP growth in 2014 (never mind, GDP is not that great metric for Ireland, but that's all we have to compare across the economies as of now).  The data is on per-capita basis and the index reflects 100=value of real GDP per capita in the year of pre-crisis peak.

So how is Ireland faring?

Ah, as of 2014, with 'robust recovery' being 'secured' we are the third worst-off economy in the Euro area, with GDP per capita in real terms down 11.9 percent on pre-crisis peak and 7 years (longer-tail of the range) duration of the crisis. Two economies worse off than our 'robustly recovering' one are: Greece and Cyprus. And of these, only Greece is as long into the crisis as Ireland.

But, I hear you say, things are improving in Ireland faster than anywhere else... Shall we take a look?

The rate of improvement is measured by the slope of the line. By this measure, Ireland in 2014 is indeed improving faster than anyone else, except the recovery is close to or on par with Latvia, Slovakia and Malta. But here's a kicker: 2014 rate of improvement in Ireland is similar to the rates of improvement attained in the past during this crisis by:

• Latvia in 2011, 2012, 2013 and 2014
• Finland in 2009 and 2010
• Malta in 2010, 2013 and 2014
• Slovakia in 2009, 2010 and 2014
• Germany in 2010 and 2011
• Austria in 2011

So our 'unique today' is not as unique as we would like it to be, both today and historically over the crisis period.

Time to be a bit more humble, perhaps? Just to avoid falling into over-confidence fallacy?

16/10/2014: Stating the Obvious, yet the Un-mentionable

With all the talk about 'inflation is too low' in Europe, let me put it to you succinctly: It is not the inflation, stupid! It is income, aka consumers capacity to sustain demand...

In real terms, and with illicit drugs and prostitution factored in, whilst counting in addition bogus R&D reclassifications and other 'bells and whistles' of national accounts, only TWO of the Euro Area 12 'rich' economies have managed to regain their pre-crisis real GDP per capita peak: Germany and Austria. One of them - Germany - has no demographic driver for increased demand. So go figure: price inflation is low because incomes are low! Not because monetary authorities are not doing something. Nor because Germany is dragging Europe down. May be, because, in part, fiscal authorities have taxed the daylights out of people. And may be because banks have shoved so much credit into households prior to the crisis than few can borrow much more to sustain unsustainable (judging by income growth) consumption growth.

So again: It is not the inflation that is too low, stupid! It is income, aka consumers capacity to sustain demand, that is too low...

15/10/2014: Changing Nature of Financial Diversification

My new blog post on Learn Signal Blog covering the changing nature of diversification in financial markets: http://blog.learnsignal.com/?p=83

Certainly of use to our MSc in Finance class!

14/10/2014: Budget 2015: Of Double Irish and Tax Non-Reforms

This Budget was supposed to be about giving working families something back. In the end, it was not.

The core asymmetry in Irish tax system has been, since the onset of the crisis, increasing burden of State on ordinary incomes. This remains.

2014 projected income tax take is EUR17.18 billion out of total tax take of EUR41.04 billion. 2015 projected income tax at EUR17.98 billion against total tax take of EUR42.3 billion.

Corporation tax: 2014 projection for EUR4.525 billion and 2015 at EUR4.575 billion.

So as a share of total tax take, income tax continues to rise, corporation tax continues to fall.

There is no re-balancing of tax system. Households pay. Full stop.

Of core measures, announced, corporate tax reforms are the biggest. As predicted, 12.5% headline rate is here to stay. Minister Noonan sounded like a politician cornered by someone with a bit more power (Germany? US? EU? UK? all of the above?) on the topic. And he stayed his ground (absent visible opponents).

But the 'non-tax-haven' tax loophole of the Double Irish was abolished, as predicted. For new companies coming into Ireland - starting with 2015 - all companies resident here will be resident here for tax purposes too. For existent companies, the new provision comes into force at the end of 2020. Transition period will see more tax optimised activity being booked through Ireland as corporates embark on building up cash reserves. This firmly puts any risk of economic activity falloff after the full abolition of the Double Irish out into next Government, so should FF or SF or both win next elections, they will bear the weight of any disruptions. Before then, however, more will flow through Ireland on the way to real tax havens.

It is worth reminding that in October 2012, Minister Noonan steadfastly claimed that abolishing Double Irish provision was not within his remit.

Minister Noonan also set out some sketch of the forthcoming tax reforms. These will:

1) Remove completely any base year consideration in application of R&D tax credits. The measure will take hold from January 1, 2015 and will create more incentives to book R&D spending into Ireland. Whether this will tangibly increase actual R&D activity here remains to be seen, since R&D investment is even harder to price than transfer pricing in the services sector. Suppose a lab located in, say, New Hampshire develops a formula for new drug. But final preparation is registered into Ireland. All R&D investment, save minor expenditure on lab operations, can be billed into Ireland, in exchange for having a 'token' small lab of formula preparation team here. make a key scientist fly into Dublin for a couple of meetings and you have magic R&D activity here that can easily exceed activity in the actual lab. The “knowledge box” will, presumably, tax corporate profits generated as a result of patented innovations in a way similar to so-called 'patent box' structures already in place in the Netherlands and the UK. UK 'box' has a tax of 10% , Netherlands' one has 5%, and Minister Noonan promised Irish equivalent will be 'the best in class', so it will need to undercut the already existent ones. Which means that the above-mentioned example of an 'investment' will book profits into Ireland as payments on R&D-generated IP and these will be taxed at a reduced rate.

2) Aim to deliver even more 'competitive' environment for 'intangible assets' domiciling in Ireland. In other words, the fabled IP pushed through the fabled 'Knowledge Development Box', aka black box tax system that leaves IP outside tax net. This should sweeten the removal of the Double Irish for MNCs, especially in the IP-intensive ICT services sector. But it will also mean preciously little in terms of incentivising real activity on the ground here. Instead of shifting profits to Bahamas to get them off the tax hook, MNCs can just book payments into Ireland as payments on IP, making them basically tax free too.

3) To facilitate internationally trading sector, Budget 2015 enhances Special Assignee Relief Programme

4) To address future criticisms of the new system as being unfair to our trading partners, the Revenue will get additional resources to act as a 'competent authority' in enforcement and monitoring of corporation tax matters.

Gas bit is: the EU Commission is already investigating if 'patent-knowledge' box schemes constitute illegal state aid.

One simply cannot assess the full impact of the new changes on the economy. We have no data on specific activities by MNCs here. We have no data on operating tax structures. We have no data on how MNCs can re-arrange their activities here to address the challenge. It is, however, safe to assume that none of existent MNCs will be rushing to do much before 2020. And it is also safe to assume that by 2020, when the Double Irish fully bites the dust, the OECD-led BEPS reforms will be already known.

This, in effect, will mean that Ireland's Double Irish abolition today is a preemptive move that preempts nothing but bad PR. Reputational gain. Opportunity of real reforms for now remains a distant hope.