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Dáil Éireann debate -
Wednesday, 2 Dec 2009

Vol. 696 No. 4

Companies (Miscellaneous Provisions) Bill 2009 [Seanad]: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Sinn Féin acknowledges that the Bill has some very positive elements but also warrants caution. For example, the removal of the ceiling in the High Court for applications from €317,000, which is the current level, is very positive because it lifts a significant or potential financial burden from taxpayers, which is a reasonable policy. We will leave it to the system and rely on the court to make proper decisions in that regard. I have outlined several other positive elements which I will not discuss.

It is interesting to note how quickly the Government can move when it decides to move, as it decided to move in terms of this Bill. I am reminded of an issue which I referred to briefly when I interrupted the Minister of State's contribution, namely, the regulatory burden for small and medium size enterprises. There is a significant difference between small and large companies. For a company which employes 12 to 15 people to employ a person to do the work of a clerk and assemble the figures for InterStat or whoever is a major burden if it is something which takes two days a week or five or six days a month. If one compares it to a company with 100 to 210 employees, which would probably have an information technology system in place where one can hit some buttons and assemble and send off the figures, it is clear there is a disproportionate burden in terms of administrative costs on small and medium size enterprises.

The Minister of State told us earlier that he hopes to have the Bill before the House in the autumn of next year to assemble and reform it——

I said I would publish it.

The Minister of State said the Bill would have 1,300 amendments, which will keep us going for quite a while. I hope the Dáil will resume early next year so we can spend a large chunk of September dealing with the Bill to try to pass it as quickly as possible. It has taken longer than was necessary to bring it before the House. I am not denying that significant work was involved. The outcome of the Bill is what is important, namely, a reduction in the regulatory burden on business so there can be fewer overheads and more efficiency, which is a critical element of the Bill. I hope the Minister of State will bear that in mind and realise that the sooner the Bill can be brought before the House the better because it is long overdue.

The current trend continues to be a greater imposition of regulatory burden on business. We do not want more regulation but better, more efficient regulation. We need regulation, which if it has to be administered, can be done through efficient IT systems. Perhaps the various State agencies such as Enterprise Ireland could offer some assistance to companies. The county and city development boards could offer assistance to companies in terms of IT packages that would streamline some of that work and help business to be more efficient. Clearly, the upward surge in costs to businesses in recent years has hampered the creation of jobs and of export markets. I hope the Government will take that seriously and address it as quickly as possible. We look forward to working with the Government in that regard to clear up that legislation when it comes before the House. I hope it will be sooner rather than later.

I wish to share time with Deputy Connaughton.

Is that agreed? Agreed.

I welcome the opportunity to contribute to the Bill, which is part of an exercise to consolidate 14 other Acts into one. Its purpose is to allow US subsidiary firms based in Ireland to temporarily use the US accounting standards when producing their accounts. We need to view all this in the context of investment in the country and job creation. Many Members of the House will recall occasions in the past — the distant past, thankfully — long before globalisation became an in-word and the movement of investment out of this country and the loss of jobs, when one would have to question the accounting and auditing practices of foreign companies operating in this country. Thankfully, that has gone and the Bill will go some way towards eliminating difficulties that may have arisen and costs to the Exchequer as a result of court cases undertaken in order to justify particular procedures.

We have had various strategies to spread job opportunities and investment equally throughout the country. However, we now know that IDA Ireland and Enterprise Ireland have consolidated and focused essentially on four or five major centres, namely, Dublin, Cork, Limerick, Galway and perhaps one in the midlands. In the Government's spatial strategy, there was much ado about hub towns and gateway towns. There was a legitimate anticipation that people would see an equal spread of investment throughout the regions. However, tragically that has not happened as the Minister of State is well aware. For example, my constituency has a gateway town in Ballinasloe and a hub town in Tuam. We also have towns like Loughrea, Portumna and Gort. A reply to a parliamentary question I asked in the not too distant past made it clear that IDA Ireland did not bring any major investors to those towns. I do not know whether it was through its lack of initiative in focusing on those centres or whether it was a total lack of interest from foreign investment companies to come to any towns. There is an onus on Government to implement the spatial strategy to give an equal spread of opportunity to the other centres I have just named.

The Government has failed to recognise the importance of research and development and has made cutbacks in all third level institutions. Were it not for the initiative of the staff and the current and former presidents at NUI Galway to encourage investment for research and development into Galway, the employment picture in Galway might be different. The high-tech employment we have was in the main nurtured by the efforts and endeavours by those in the university to support it.

While this legislation is important to regularise the accountancy of new firms, etc., it is important that the Government recognises that investment should and must be spread equally. During Question Time, I heard Deputy O'Donnell refer to what could have happened in Limerick if certain actions were taken. I can bring Members nearer to home. CIGNA decided to move its operations away from Loughrea because of globalisation and our lack of competitiveness. I was in consultation with the Minister of State who was very positive on an application to European Globalisation Adjustment Fund. However, there was a failure on the part of Enterprise Ireland, FÁS and the other agencies that had come together to form a task force in Loughrea to complete the application form for European Globalisation Adjustment Fund, similar to what happened in Limerick. The failure to make an application to Europe for funds for additional training for the many people who lost their jobs in Loughrea indicates something terribly wrong with the agencies responsible for nurturing, helping and supporting industries, particularly at a time of crisis when so many people are losing their jobs due to lack of competitiveness.

It is important that agencies like Enterprise Ireland and IDA Ireland are fair to all areas of the country and do not concentrate solely on Galway, Limerick, Cork and Dublin that they regard as attractive — although they will deny saying it — with the rest of us looking on. Why did the Government introduce a spatial strategy concentrating on Athlone, Tullamore and Mullingar, while ignoring a town like Ballinasloe that was lost to industry? Three major industries were lost there in a matter of years and the Government could not see the merit in having four centres rather than a three-way triangle for industrial development. Ballinasloe and east County Galway in general have been left in a wilderness without industrial development. It is great to see development in Galway city to where many people commute. However, the Government's spatial strategy has been ignored by those agencies and we have relied on the efforts of the county enterprise board and Galway Rural Development Company to create jobs in small units. They were encouraged by these agencies but have been starved of finances while the other agencies do not know what to do with it and hence they go off on their various excursions to foreign lands in the guise of seeking employment opportunities and training.

The Government should promote the potential of all areas rather than the concentration and focus on a few major areas for job creation when the opportunity presents itself again. We should never again see a reply to a parliamentary question that there was no visit by IDA Ireland. It could not even encourage industrialists of any foreign or indigenous source to visit towns such as Ballinasloe, Tuam or Loughrea. There is something wrong in those agencies if they cannot achieve that. There are examples. It is on the record that they have failed to take the initiative in persuading industrialists to even consider locating in those towns. It may be necessary to change the structure of the IDA and Enterprise Ireland, including by amalgamating them, to ensure this is followed through and that there is a fair chance for everyone in the country. It is the same for other areas throughout the country. We cannot let these people continue on their merry way, saying nobody is interested in going to this town or that town. That is not the case.

I am delighted to have the opportunity to speak on this Bill. I read the Minister's speech with interest and I do not think anyone could quibble with the main principles of the Bill. It appears to be concerned with accounting procedures. I cannot say I fully understand the concept involved because I am not an accountant, but I know enough to say that if it will cost American firms more to comply with the accounting procedures of both the US and the EU, that is a good reason for this Bill.

This is an opportune time to talk about industrial development. Contained in this Bill is a type of understanding that if there are certain things that are now necessary, this will in some way greatly benefit the economy. I have no doubt this is important and that is why I accept it as such. However, if the Minister thinks what is contained in this Bill will dramatically change inward investment from the United States or anywhere else, he may be mistaken.

Only a few years ago we were first in the world in terms of the competitiveness of our exports; now we are approximately 24th. We took our eye off the ball. Nobody knows this better than the Minister because he works at it every day. We have the most expensive telephone system in the world. With all the talk about competition, there is not a lot happening in that regard. We certainly have the most expensive electricity and gas. That is not a political point; it is a matter of fact. Our wages are out of kilter as well. Yet we put together that package and try to compete on a global market to attract the people that are good to Ireland.

I take my hat off to the Americans and anybody who would create thousands of jobs in this country. However, the minute it is more profitable to shift the system somewhere else — somewhere they will make more money — they are gone, whether they are Americans or anyone else. That is simple economics. Yet the Government, for the past ten years, did not see it that way because it was consumed with the construction bubble. The money was coming in as though there were leprechauns jumping over every ditch in the place with pots of gold. The Government never thought it would see the end coming. It never thought it would have to face the music, as we will in the House next Wednesday when the greatest hair-shirt budget that has ever been visited on the Irish people will be read out from the very seat on which the Minister is sitting.

We must go back to basics. Until such time as we get our economy back into kilter, we must live on what we produce. It is as simple as that. We have four million people and are not bestowed with oil wells or anything similar. Most of the time we import products, manufacture items and re-export them. In recent years we have had a large amount of indigenous industry, which is important to us, and of course the service industry. However, we have found out to our cost in the past four or five years that this may not be enough. There is an industrial estate at Tuam in County Galway which must be one of the most elite industrial estates ever built. One would think one was going into the Taj Mahal, with beautiful gates and the whole works. However, the only people who have had jobs there in the past three years were those who were working there before. Not a single job has been created there, although it cost millions to build. Yet we are glad to have it in Tuam because we hope companies will be established there.

We cannot understand the situation. Actually, I understand it well: unless the underlying conditions are good, people will not commit millions in such investments. We have a good workforce, but unfortunately there are now many more people looking for jobs. People get fed up when they hear the word "competitiveness", but if we do not whip costs into line, the Bill means nothing to anyone. The Minister knows that as well as I do.

When the national spatial strategy was launched, there was not a Minister, for weeks on end, who was not above in a box talking about all the good things this would bestow on Ireland. We had gateways and we had something called a hub, if you do not mind. Governments are great for all kinds of definitions. All I know about hubs is that Tuam was one, but I cannot see what was bestowed on the town of Tuam. The hospital was let go and the new one was never built. I have spent a lifetime at this and I know that the further one moves away from the economic heart of the country, which is Dublin city, the harder it is to persuade industrialists to travel there. That has been the case for years. There have been a number of changes which will help us — the new N6 road to Galway, when it opens in a few weeks' time, the airport and Knock and so on. They are all useful in their own way. It is ironic that we now have the infrastructural set-up, which we never had before, but our competitiveness has gone out of kilter so we still cannot win.

Obviously there must be an integrated approach by everybody but, unfortunately, time is not on our side. Despite all the talk about rationalisation and the ESB and Eircom, I am not seeing the required reductions in the cost of services. Let us take the bin collection, for example, or the cost of water. They are all utilities that bear no relation to the profits that companies may be able to make. These costs are outrageous. If we do not accept these simple facts we will have serious trouble encouraging companies to locate here.

There are a number of things in our favour. Most American companies that may come to Ireland or are already here believe we have a good and adaptable workforce and are situated in a good place in the EU. However, if we do not get the other factors right quickly we will be in serious trouble.

The people of east Galway sent me here, just as the people of Tallaght sent the Acting Chairman. It is important to disperse opportunities around the country. This has been a hobby-horse of mine for years. I am not silly enough to believe that large anchor industries can be placed in areas such as Mountbellew, where I live. That is why it is important to have the system whereby we have a good Galway, a good Sligo, a good Letterkenny and so on. I compliment the Western Development Commission on the documents it has brought out to show the disparity between the east coast and the west. If nothing else, it gives us an opportunity to speak about this in the context of this Bill. I hope that the Bill will do what the Minister of State said it will do, but there is a great deal more to be done.

First and foremost, I thank the Deputies for their contributions to this debate and the Senators for their contributions in the Seanad. I look forward to the Committee Stage debate next week.

There are a few issues to clarify. First, the purpose of this Bill is to address a few simple accounting difficulties that have arisen in the context of companies locating their headquartering facilities here. It is not to cater for every company. There are a number of strategic companies which are large employers. They are very reputable companies and they make a major contribution to the employment in this country. It is not for every company that would like to do its accounting practices through other methods.

On issues with regard to reputational damage, IDA Ireland, ODCE and the Revenue Commissioners were first and foremost asked to look at this as well. We did our own due diligence. What is critically important is that the US GAAP accounting procedures have exacting and high standards. It is important to put that on the record. US GAAP has good accounting practices and is internationally recognised as having that. It is not that they are trying to move to a system where there are easier or more lapsed standards. That is not the case.

The primary purpose of the Bill is to assist companies that have moved here in recent times, which are headquartered and had facilities here, and want to move from US GAAP accounting to Irish GAAP or IFRS standards. That is to be done over a period of time of not more than four years. This provision runs out in 2015.

Another issue with which some Deputies had grave concern — I know that they were not referring directly to me — and about which I would not have any concerns is the context of giving the Minister the authority to make regulation. An important part of the Bill, section 2(4), states:

Every regulation under this section shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation is passed by either such House within the next 21 days on which that House has sat after the regulation is laid before it, the regulation shall be annulled accordingly but without prejudice to the validity of anything previously done thereunder.

The bottom line is that if the Minister makes a regulation, it is laid before the Houses and if either one of the Houses passes a resolution annulling that regulation, that is the case. Therefore, there is democratic accountability included in the Bill at section 2(4). It is critically important that people realise there is democratic accountability here. I myself would have concerns if it was simply a matter of the Minister deciding to draft a regulation and hand it over to the officials, and that then the matter would be done and dusted. It does not work like that and, thankfully, this provision in the Bill insists on regulations being laid before the Houses of the Oireachtas. Democratic accountability to the parliamentary assembly is of critical importance.

Reputational risk, as I stated, was raised by a number of Deputies and it would be critically important that no Deputy leaves it hanging in the air. Either they have concerns or they do not. We can alleviate any of their concerns if they look at what this is trying to achieve. It is an interim measure. There are already exacting standards in the US, including generally accepted accounting principles, and US GAAP.

A number of issue were raised and if I forget any of them, we can refer to them again on Committee Stage. Deputy Penrose spoke of Dr. Courtney and his fine volume on company law. It is a fine read and I would urge every Member to read it before Committee Stage on Wednesday next. It would be an interesting read over the weekend.

It makes nice bedside reading.

I thank Dr. Courtney, in particular, who is chair of the Company Law Review Group, and the other members who sit on that body reviewing company legislation with the purpose of consolidating it into one Bill, which we hope to publish in September next. As outlined by Deputy Morgan, there will be 1,200 sections in that Bill. It will be difficult and exacting, first, on the Company Law Review Group, but also on the officials who must interpret that and put it into format, on the Parliamentary Counsel and on everybody else involved. It will be very exacting on the members of whatever committee it goes before in the context of winding its way through the Oireachtas. It is another Bill to which I look forward.

I will deal with a few basic issues here. In response to Deputy Varadkar, the Director of Corporate Enforcement was consulted. It enforces company law and the director did not have any major concerns with that aspect. The Revenue Commissioners were also consulted.

I repeat that these are very reputable companies. Deputies asked if they were going to use different accounting standards for the purpose of gaining competitive advantage. That is not the case. The context of capital depreciation of equipment such as plant was raised by some Deputies, but that does not arise, nor will there be a potential loss of revenue to the State.

They will save money though.

That is the purpose of the exercise, but only a small limited number of companies — roughly, five or six companies — will avail of this. That is the purpose, rather than putting an onerous cost on them unnecessarily that they can over a period of time move from US GAAP to Irish GAAP or IFRS. There are many acronyms in use in the Department. The other day I was at the world trade talks where they have a language of acronyms of their own. One would nearly want a dictionary of acronyms.

I was asked why the issue of the stock exchange was included at short notice. That issue did not come to our attention until quite recently. It only came to our attention in the context of a director sitting on an inquiry established by IASSA and having to retire prior to the inquiry being completed. It was brought to our attention in October last. We were reacting to issues which were raised and which came to our attention at the time.

The amendment of the funds industry is being published tomorrow. Deputies will be able to digest that over the weekend as well and we will be able to deal with it on Committee Stage. I have covered most of the other areas of particular interest to the Deputies.

There is a consolidation of standards and, hopefully, over the next number of years one will see the various standards of accounting around the world coming together under a more unified code. I would urge at every possible level that there would be a standardised, uniform generally accepted accounting principles in use by the European Union, the United States and other major economic blocs.

I was asked if the Minister decided to make regulation and lay it before the Houses, and if it was discussed by the Houses and accepted, what other accounting standards may be under consideration. At present, there are no other generally accepted accounting principles from other countries under consideration, but it would be unhelpful and would tie up the Oireachtas unnecessarily to have primary legislation debated through the Houses again to deal with one or two companies which may find that this issue is causing them difficulties in the short term. It would be preferable to give the Minister the powers to lay regulations before the Houses for Deputies to consider.

Canada and Japan also would have exacting accounting standards. It is critically important to state that the legislation does not give the Minister a free hand to decide on any standard he or she may prefer. There are exacting standards laid down in the legislation as to what he or she can consider in the context of placing a regulation before the House. As regards the valuation of assets, these companies will follow the US GAAP to the extent that it does not conflict with company law. They will therefore follow these valuations. That question was also raised by Deputy Varadkar. The purpose of the Bill is that rather than putting excessive, onerous administrative costs on companies here that are employing many thousands of people, there will be a transitional period over which they can move from the US GAAP to the accounting centres of Ireland or IRFS.

That is primarily the purpose of the Bill, which will now move on to Committee Stage. Deputies expressed concerns about the funds industry and the fact that we are tabling an amendment at late notice. It is not really at late notice, however, because we have until next Wednesday for Deputies to consider that amendment. It will be primarily to allow funds to migrate in and out of the country. The stock exchange issue was merely to clarify some of the matters that were raised by some companies. It is to avoid administrative burdens being placed on them, but we are conscious of the need to notify markets. There is already strong regulation and legislation in place regarding PLCs that are floated on the stock exchange in the context of purchasing own shares. The requirements are onerous and rightly so. Companies often purchase their own shares if they have surplus cash reserves. There is nothing unusual or untoward in that. It is part of the normal, everyday management of PLCs. A notification process is already in place but in the context of this legislation we are saying it also must be put on the website.

Reference was made to the fact that some people may not be aware of it, but the markets are always aware of these things. I can assure the House that if it is put up on the website of any PLC, the markets know about it immediately. People involved in trading and monitoring markets are aware of PLC websites, and that shares are being purchased. In any case, they have to notify the stock exchange within a day of the shares purchase.

I hope that covers most areas that were raised by Deputies concerning the Bill. Broader issues were also raised in the context of Government policy on competitiveness, addressing the challenges of unemployment and regional development. My comments may stray from the Bill, but I beg the indulgence of the Chair to refer to the issues that were raised by Deputies in that regard. May I do so?

The two Deputies opposite represent Galway. Clustering is critically important. People should be proud of Galway in the context of the medical devices, for example.

Believe me, we are and I said that.

The Minister of State should not go away with the idea that that was not noted. I can assure him it was.

I want to put that on the record as well.

I was just making the point that clustering and getting critical mass is very important. In Galway, for example, it concerns medical devices and some areas of life sciences. They have international standing because of the size and scale they have achieved. So the clustering of companies is very important. Equally, the Government cannot dictate where a company locates. The IDA's first purpose is to attract foreign investment to Ireland and thereafter it tries to show potential investors where there may be a regional jobs deficit. Ultimately, however, it is the company that will decide where to locate. All the IDA can do is to point them towards Ireland.

The first thing is to at least bring them down and give them a chance to look at it.

The Deputy has made his point.

When we have them secured in Ireland the issue of location arises. There is a regional policy in the IDA, which tries to point potential investors to where there may be a deficit of IDA-supported jobs.

I thank Deputies for their contributions on Second Stage and I look forward to debating the Bill again on Committee Stage next Wednesday. I also wish to thank my officials who are working day and night both on this Bill and on other company legislation at present.

We must wish them a Happy Christmas.

Go raibh maith agat, Minister. I wish you well on Committee Stage.

Question put and agreed to.
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