dolmen butler briscoe presentation by paul mcgowan to the irish charities tax reform group
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Strictly Confidential. Dolmen Butler Briscoe Presentation by Paul McGowan to The Irish Charities Tax Reform Group on Share giving, the potential in Ireland 30 September 2003. Important Notice. - PowerPoint PPT PresentationTRANSCRIPT
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Dolmen Butler Briscoe
Presentation by Paul McGowan
to
The Irish Charities Tax Reform Group
on
Share giving, the potential in Ireland
30 September 2003
Strictly Confidential
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This presentation document has been prepared for information purposes and is supplied solely to assist the recipient in deciding whether it wishes to carry out further investigation in respect of the proposed transactions outlined herein (the Transactions). The information contained in this document has not been independently verified. The recipient of this document must make its own investigations of the Transactions and all other matters referred to herein. Nothing in this document including that which may otherwise be said or done by Dolmen Securities Limited (Dolmen) or Dolmen Butler Briscoe (DBB) (and their respective parent undertakings, subsidiary undertakings, officers, employees or agents) in connection with this document, the Transactions and all other matters referred to herein, shall constitute advice or a recommendation of any sort to the recipient. In these circumstances, neither Dolmen or DBB (and their respective parent undertakings, subsidiary undertakings, officers, employees or agents) makes any representation or warranty (express or implied) as to the truth, accuracy or completeness of the document or the information contained herein or assumes or accepts any responsibility or liability (whether for negligence or otherwise) for any of the same. This document does not constitute an offer or invitation to purchase or subscribe for any notes or securities and it may not form the basis of, or be relied upon in connection with, any investment decision. This document and its contents are strictly confidential and, accordingly, must not be passed to any third parties. In addition, each recipient of this document must check and observe all applicable legal requirements.
Important Notice
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Subject to changeAgenda
Background - Irish Economy • Public Finance Pressure• Fear of loss of Revenue• Current Government thinking
Current Rules• Investing in Equities• Equities and charity
The market potential in Ireland• Size of Market & Type of investors • Equity versus Dividend giving
Conclusion
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A. Background – Irish Economy
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Subject to changeBackground
Irish Economy & Tax Receipts
Following 10 years of extraodinary growth – circa 10% pa Ireland is expected to grow its GDP in 2003 by 3%.
Tax receipts fall due to economic slowdown.
Corporate profits fall plus personel salary’s & discretionary bonuses fall
End of EC funding in 2002.
Increase government spending, 20% in 2002 & 15% in 2003
The introduction of benchmarking payments will further pressurise the public finances and consequently the availability of funds or the ability of the government to introduce new tax reducing measures.
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Subject to changeBackground
Irish Economy & Tax Receipts (Continued)
The Revenue commissioners and Department of Finance very cautious of introducing new tax aleviation structures. In fact the current regime is commited to ending all tax allowance and benefit structures eg Urban Renewal, Capital allowances & Film funding.
Recent poor experience of special reliefs have also left negative feeling with Revenue eg Gross Roll Up, Capital allowances
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B. Current Tax Rules
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Subject to changeCurrent Tax Rules
Tax Treatment
A donor, who makes a donation of assets to an eligible charity qualifies for Capital Gains Tax (CGT) relief on the disposal.
However, the disposal is deemed to occur at a rate that gives no gain/ no loss to the donor.
The basis of assesment covers PAYE, Self assesment, Corporation Tax
BUT
If the donation is not in CASH then it does not qualify for additional charity donation relief as introduced in Finance Act 2001.
This relief covers cash donations over Euro 250, must not be repayable, nor can it confer a benifit on the donor and finally must not have any conditions attaching.
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Subject to changeCurrent Tax Rules
Tax Treatment - Latest developments
The ICTRG in its October 2002 submission to MOF requested that the definition of “relevant donation” be extended to cover gifts of assets,
such as shares, securities, property and other investments.
This is the treatment in US, UK, Canada & Australia
Minister of Finance in his response resisted the proposal on the following grounds;
a) That the issue of valuation might be disputed. b) Concern that non cash donations might not come out of after tax earned
income.c) Fear that tax abuse might occur where non cash items allowed eg shares in
private companies.
Unfortunately for Charities, Ireland has one of the most attractive and aggressive tax system in the western world.
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C. Share Giving in Ireland – The Potential
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Subject to changeShare giving potential in Ireland
There is very little detailed market information available. The last published study was undertaken in 1999. The key pointers from this were as follows
Total Share owning public 500,000 people( primarily function of Eircom)
Share holders excluding Eircom 113,000
Next largest groups Irish Life, Canada life, First Active, Kerry, Greencore, Golden Vale, Waterford Foods
Average holding size Euro 6,300 % holding more than one company 30%
Deal more than once a year 7%
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Subject to changeShare giving potential in Ireland
Other Issues
Many of the holdings are linked to livelihood and disposal very unlikely
Dividends offer a more attractive initial route
When Dividends paid the investor is asked to elect for cash or scrip.
Solution might be to get charity donation of dividend as an alternative.
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Subject to changeShare giving potential in Ireland
Share Giving 113,000 hold shares * 7% regular dealing = 7,913
7,913 * average value Euro 6,300 = Euro 49,833,000
Assume a) 5% takeup = Euro 2,491,650b) 1% Take up = Euro 498,330
Alternative
Dividend Giving
Almost all quoted companies pay dividends with election form for cash or shares
Iseq market Capitalisation = Euro 59 billion Average Irish company dividend = 2.6% Assume a) 5% of dividends donated = Euro 76 million
b) 1% of dividends donated = Euro 15.3 million
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D. Conclusion
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Subject to changeConclusion
Negatives
Uncertain econonic time with Unfavourable tax environment
Very small share ownership pool, with many holdings linked to livelihood
Monitary value limited
Positives
Irish people have strong history of donation to charity
Irish public react positively to attractive tax schemes
As a start Public companies could be encouraged to offer a charity donation as a dividend alternative election to cash or equity
We, in Dolmen Butler Briscoe, are prepared to provide special service if rules change.