News Archives - Page 2 of 289 - Pat Carroll PCCO - Chartered Accountants & Tax Advisors

Commission approves Government’s €200m scheme to support firms during Covid-19

The European Commission has given the green light to the Government’s €200m scheme to support firms through the Covid-19 outbreak. 

The commission has found the plan to be in line with EU state aid rules under the temporary framework it has put in place to support the European economy through the crisis. 

“With this €200m Irish scheme, approved under the new State aid Temporary Framework, we continue to work with Member States to ensure timely support to the economy through these difficult times,” said Executive Vice-President Margrethe Vestager. 

“This measure will, in the form of repayable advances, help companies affected by the coronavirus outbreak to weather this crisis and bounce back strongly afterwards,” Ms Vestager said. 

The scheme will allow firms here to access loans if they are experiencing or expect to experience a drop in turnover of at least 15% due to the virus outbreak. 

Companies must have ten or more full time employees and be in certain manufacturing sectors and/or internationally traded sectors. 

Minister for Business, Enterprise and Innovation Heather Humphreys has welcomed the approval for the scheme, which will be administered by Enterprise Ireland as part of a suite of emergency supports to help Irish companies that are seriously and adversely affected by the Covid-19 pandemic. 

In a statement, the Minister said the support will be available to assist companies access the necessary liquidity and funding to sustain their businesses in the short to medium term.

According to the Commission today, the Irish plan is necessary, appropriate and proportionate and will contribute to managing the economic impact of the coronavirus here. 

Under the temporary rules adopted by the EU Commission to give member states more leeway when it comes to offering state aid to companies, grants of up to €800,000 may be given to a company to address its urgent liquidity needs. 

Member states can also provide guarantees to ensure banks continue to provide loans and may also provide subsidised public loans to firms. 

Short-term credit insurance can also be provided as well as safeguards for banks that channel state aid into the economy. 

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€9m more to be paid out in Covid-19 wage subsidy scheme today

Revenue has assured employers that they will not be deemed insolvent if they avail of the government’s Covid-19 wage subsidy scheme. 

Concerns had emerged that an unpaid wages declaration would effectively be an admission that employers were trading while insolvent.

The key criterion is an employer’s declaration that disruption brought about by the pandemic has resulted in sales being cut by 25%.

The Chairman of the Revenue Commissioners Niall Cody said that he does not believe it will be a challenge for employers to prove that their income has been reduced by more than 25% during this crisis.

Chartered Accountants Ireland has recommended that employers keep any supporting records to demonstrate the negative impact so they can clarify issues with Revenue, should they arise.

The Revenue Chairman has also urged employers to be careful when filling out applications for the Government’s Covid-19 wage subsidy scheme. 

Niall Cody said there are 26,000 employers in the scheme already but there is still a small number, in the hundreds, that entered incorrect bank details. 

Mr Cody said this means Revenue is “sitting on money” that it wants to pay out to companies. 

He told Morning Ireland that €8m was paid to the scheme yesterday and €9m will be paid today.

He added that he believes that number will continue to rise. 

Niall Cody said employers should not worry about being published on the list of companies who applied for the scheme as it will be “a mark of honour for employers who did the right thing”. 

Mr Cody said Revenue guidelines show that even if a company has cash reserves for debt or future expansions they can still qualify for the scheme. 

The purpose of the scheme, he said, is to support employers and leave them in a position to be a valid business when the recovery comes.

Mr Cody said businesses applying for the scheme will have an ongoing relationship with Revenue and he does not anticipate that many businesses will need to be reviewed at the end of the scheme.

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ECB asks banks to halt dividends over Covid-19 crisis

The European Central Bank has asked euro zone banks to freeze dividend payments “until at least October 2020” to preserve liquidity that can be used to help households and companies through the coronavirus crisis.

The Frankfurt institution also asked banks not to buy back shares, another tool to reward shareholders, at a time when policymakers everywhere are taking unprecedented steps to support the global economy.

“The ECB expects banks’ shareholders to join this collective effort,” it said in a surprise statement. 

The measures would “boost banks’ capacity to absorb losses and support lending to households, small businesses and corporates during the coronavirus pandemic”, it added.  

The ECB’s proposal, which would affect dividends for the financial years 2019 and 2020, echoes that of the Brussels-based European Banking Federation.

The EBF said last week that “listed banks should not accrue dividends or undertake share buybacks so as to maintain maximum capital preservation” during the crisis. 

The ECB’s suggestion is likely to be welcomed by euro zone citizens, many of whom vividly remember the taxpayer bailouts of global banks during the 2008-2009 financial crisis. 

“The coronavirus outbreak is threatening the lives of many people around the globe and is pushing the economies of many countries into recession,” ECB supervisory board chair Andrea Enria said in a separate blog post.

“Unlike in the 2008 financial crisis, banks are not the source of the problem this time. But we need to ensure that they can be part of the solution,” Andrea Enria said. 

He estimated that compliance with the ECB’s proposal would keep an extra €30 billion of capital in the financial system. 

While many euro zone banks may be able to hold off on their 2020 dividend payments, some have already paid out those for 2019 or have committed to doing so. 

The ECB said it was not asking for those payouts to be scrapped, but lenders whose shareholders are set to vote on dividend proposals in upcoming annual meetings “will be expected to amend such proposals in line with the updated recommendation”. 

After initially facing criticism for not taking as much action as other central banks in the coronavirus fightback, the ECB has in recent weeks unleashed a flurry of measures to shore up the 19-nation euro area.

That includes a “big bazooka” scheme to buy an additional €750 billion in government and corporate bonds this year to keep cash flowing through the financial system. 

The ECB has also launched a fresh round of ultra-cheap loans to banks and eased rules on capital buffers to encourage banks to offer loans to households and businesses. 

It further sought to calm markets by promising there would be “no limits” to its commitment to protecting the euro. 

The ECB warned earlier this month that it expected banks “to use the positive effects coming from these measures to support the economy” and not to increase dividends or bonus payouts. 

Authorities in the Nordic countries of Finland, Norway and Sweden have likewise been urging banks to forgo paying out dividends. 

Thousands of companies worldwide have been forced to close their doors to slow the spread of the virus, while large swathes of employees have seen their working hours cut or are facing unemployment.

Several major firms have already said they would scrap their 2019 dividends, among them German airline giant Lufthansa and European plane maker Airbus. 

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Another 283,000 people apply for Covid-19 emergency income payment

The Minister for Employment Affairs and Social Protection has said that by close of business on Friday, another 283,000 people had applied for the Covid-19 emergency income payment from the Department of Social Protection.

Speaking on RTÉ’s Morning Ireland, Regina Doherty also said that some 16,000 plus companies had applied for the wage subsidy scheme. 

“Lots of people thankfully are using income support”, the Minister said.

But she said that a lot of those people would not have even thought about income support because they were not on the restricted list until Friday night. 

“We expect to have a significant draw again this week based on the companies that have closed down,” she added. 

Ms Doherty encouraged companies to look at the wage subsidy scheme and try to keep as many employees on their books as they possibly can. 

Employers who have been affected or likely will be affected by a 25% decline in turnover are being asked to self declare to the Revenue Commissioners, she said. 

“Reaching that 25% isn’t going to be a difficulty because in some or all cases, their business has all but ceased,” the Minister said. 

Ms Doherty also said that what we are doing, in terms of social distancing, is working, and that that “should make us do it twice as hard”.

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Euro zone sentiment in record plunge as coronavirus strikes

Euro zone sentiment suffered its steepest ever monthly decline in March as the coronavirus led to declining confidence among consumers and all sectors of the economy.

In many cases the declines were evident even before crippling lockdowns were imposed. 

Economic sentiment in the 19 countries sharing the euro fell to 94.5 points in March from 103.4 in February, sharply breaking an upward trend in place from November, European Commission survey data showed today. 

The decline was the steepest monthly drop since records began in 1985. 

The overall figure, the lowest since September 2013, was slightly above the average 93 average forecast in a Reuters poll of economists. 

However, the Commission said that its data might be less accurate and comparable than usual because its fieldwork effectively stalled due to containment measures designed to stem the spread of the virus. 

Survey responses were collected between Feb 26 and March 23, but in practice the vast majority were from before national measures were enacted, such as the closure of schools, non-food shops, restaurants, cafes and sports facilities. 

For Germany and Italy, between 71 and 85% of responses were collected before significant containment measures. For France, it was more than 95%. 

Dramatic falls in expectations concerning future production and demand and the general economic situation were behind the record slump. Future employment expectations also worsened. 

Selling prices expectations fell markedly in all business sectors, led by services and retail, although consumer price expectations increased. 

Among the larger euro area economies, sentiment fell sharpest in Italy, the European country worst hit by the health crisis, and in Germany, the zone’s largest economy. 

In Britain, which has now left the EU, the decline was less marked, by just 3.5 points to 92. 

The average levels for all figures since 2000 is 100.

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European shares fall after three day rally

European shares fell in opening trade today after a three-day rally sparked by hopes of more aggressive stimulus to shore up the global economy ravaged by the rapid spread of the coronavirus pandemic.

Shares in London had sank 3.3% so far this morning, while shares in Paris fell by 1.6% and the Frankfurt market was down 1.7%.

Dublin shares also opened lower this morning, falling by 2.7%. 

More than $3 trillion has been wiped from the value of European firms since the outbreak of Covid-19.

With the pandemic still far from contained in Europe, the bloc has suspended state aid rules and limits on public borrowing and approved $40 billion worth of emergency funds to help airlines, among the hardest hit sectors in the global emergency.

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EU watchdog gives nod to delaying financial reports due to epidemic

Regulators should give listed companies an extra two months to publish their annual financial statements given the difficulty of completing audits on time due to the coronavirus epidemic, the European Union’s markets watchdog said today. 

The European Securities and Markets Authority said national regulators should “apply forbearance powers towards issuers who need to delay publication of financial reports beyond the statutory deadline”. 

Listed companies must publish an annual financial report within four months from the end of their financial year.

For those whose year ended on December 31, this would mean a deadline of April 30. 

ESMA said companies should be given an extra two months. 

Issuers of shares or bonds must also make half-yearly financial reports within three months, or the end of March for some companies. ESMA said companies should have an extra month to comply. 

“This is in the interest of investor protection and contributes to the integrity of financial markets in the Union,” ESMA said in statement. 

The EU watchdog said that if necessary it will re-assess any potential need to amend the forebearance period.

Some EU states have already extended publication deadlines.

“Therefore, this public statement will be of relevance to those jurisdictions where such legislative changes have not taken place or are not going to take place,” ESMA said.

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Employment lawyers critical of Govt wage subsidy scheme

Employment lawyers have strongly criticised the Government’s Temporary Wage Subsidy Scheme which is being debated in the Dáil today.

In a letter to the Minister for Employment Affairs and Social Protection Regina Doherty marked “Urgent”, the Chairperson of the Employment and Equality Law Committee of the Law Society Catherine O’Flynn says that flaws in the Emergency Measures in the Public Interest (Covid-19) Bill 2020 undermine its “fundamental operability”. 

She tells the Minister: “Our concern is that as currently drafted, it is unlikely most employers would avail of the provision and thus the stated aim of the legislation would be stymied”.

Ms O’Flynn makes a number of recommendations to improve the effectiveness of the proposed legislation.

She says that eligibility for the Temporary Wage Subsidy Scheme should not be linked to “complex concepts such as ‘turnover'”, adding that this concept is broad, difficult to define, and could include both domestic and non-domestic turnover.

She notes that it also introduces uncertainty around the appropriate comparison period.

In addition, she cautions that eligibility should not be conditional on “an inability to pay emoluments” – on the grounds that as currently drafted “this gateway to eligibility is vague and difficult to understand”.

She states: “It potentially means that the employer needs to be insolvent and if this is the case, it is hard to see how legally or practically an employer could “top up” the TWSP, as is the Government’s stated desire (this is also problematic where the Revenue intends to publish the names of those employers who avail of the TWSP which is a matter we would also respectfully request be reconsidered in the interests of confidentiality).”

Instead the Committee recommends that eligibility should be based on the following conditions:

  • “a. the employer’s reasonable belief that solely as a result of the economic disruption caused by the Covid-19 pandemic and not otherwise, that it will need to do one of the following in respect of its employees:
  • i. To lay off some or all of its employees for at least the duration of the emergency (to 30 June);
  • ii. or to place some or all of its employees on short-time for at least the duration of the emergency (to 30 June); or
  • iii. terminate the employment of some or all employees by reason of redundancy; and
  • b. that the employer can declare that but for the Covid-19 emergency, the business had no proposals to implement layoffs, short-time or redundancies in the period to 30 June; and
  • c. that the employer has a reasonable belief that it will retain the employees in employment when the Covid-19 emergency measures as they relate to the cessation of commercial activity and free movement of people, cease to have effect (or some other appropriate time bound limitation to that effect.)”

She says that while the Committee has a number of other observations, they do not go to the “fundamental operability” of the Bill in the same way.

She concludes by seeking an urgent amendment to the bill in line with the Committee’s recommendations – and stresses that the Committee is offering the proposed amendments “in a constructive and non-partisan fashion”.

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Euro zone faces 2% recession, 10% if lockdown lasts – S&P Global

The coronavirus pandemic will push the euro zone and Britain into recession this year, with their economies expected to shrink by as much as 2%, the international ratings agency S&P Global warned today. 

“The euro zone and UK are facing recessions. We now expect GDP (gross domestic product) to fall around 2% this year due to economic fallout from the coronavirus pandemic,” it wrote in a report.

The spread of Covid-19 has forced three billion people around the world into lockdown and economists say the restrictions could cause the most violent recession in recent history. 

Central banks and governments have rolled out a wave of unprecedentedly large fiscal and monetary policy packages to shore up their economies.  

To prevent a credit crunch, central banks have injected liquidity and cut rates to lower banks’ refinancing costs and have implemented large asset purchase programmes. 

S&P said a 2% recession would amount to a loss in real GDP of about €420 billion in 2020, compared with its previous forecast from November 2019.  

“We expect a gradual rebound of at least 3% in 2021,” the agency said. 

S&P said that “swift and bold policy responses taken now are key to avoiding permanent losses to GDP later.”

“Risks are still to the downside, as the pandemic might last longer and be more widespread than we currently envisage. For example, we estimate a lockdown of four months could lower euro zone GDP by up to 10% this year,” it said.  

Looking at individual countries, S&P is pencilling in economic contraction of 2.6% for Italy, the hardest-hit country by the pandemic, and Spain’s economy is expected to shrink by 2.1%. 

The agency is forecasting a 1.9% contraction in GDP for both Germany and Britain and 1.7% for France. 

Another ratings agency, Moody’s, yesterday forecast that the world’s 20 most industrialised countries would likely suffer a recession this year because of the Covid-19 pandemic.  

It estimated that the G20’s overall GDP would contract by 0.5%, with the US economy shrinking by 2% and the euro zone by 2.2%. 

China, however, despite suffering an outbreak of the novel coronavirus before everyone else, could see economic activity expand by 3.3%, a level that is nonetheless well below average for the world’s second biggest economy.

G20 leaders are to hold an online summit today after criticism the group has been slow to address the crisis. 

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Central Bank seeks assurance on Covid-19 insurance claims

The Central Bank is to write to the insurance industry setting out how it expects insurance firms to handle the settlement of claims arising from the Covid-19 pandemic.

The regulator says firms must ensure that all claims are appropriately assessed and where there is insurance cover in place, that claims are accepted and paid.

The Central Bank’s intervention follows complaints from some business owners impacted by the coronavirus crisis that some insurers are refusing to pay out on policies that include business interruption cover.

Peter Boland, director of the Alliance for Insurance Reform, said that it had been inundated with calls from small businesses that have had to close, thought they were covered by their business interruption insurance and are now being told by their insurer that they are not.

He has written to the Minister for Finance, Central Bank and Financial Services and Pensions Ombudsman seeking an intervention.

In a statement, the Central Bank said it continues to engage proactively with insurers on contingency and claims related issues arising from the impact of Covid-19 on consumers, households and businesses.

It also said it expects insurance firms will continue to protect customers and comply with all regulatory requirements in light of the significant economic disruption. 

Firms must ensure, it said, that all claims are appropriately assessed and where there is insurance cover in place that claims are accepted and paid. 

Sources said the bank will tell the industry in the coming days that it expects insurers to offer a claims settlement process which is fair, takes account of all relevant factors and represents the best estimate of a customer’s reasonable entitlement under a policy.

It is understood the bank’s view is policies should be clear about what is covered and what it not.

The bank is also understood to be engaging at a European level on the matter.

Earlier this week the Department of Finance said that in relation to business interruption insurance, whether a business can make a claim in relation to loss of earnings because of closure due to Covid-19 will depend on the specifics of their policy.  

However, the Minister, as a general rule, believes that insurers should not attempt to reject claims on the basis of interpreting policies to their own advantage, it said. 
 
Mr Donohoe believes that where businesses have had to close on the basis of advice or a direction to close by the Government, and their insurance policy covers such a scenario, that insurers should engage with those businesses honestly, fairly and professionally to honour those elements of the policies covered, the department said.

It also said that where a policy states that a claim can be made when a business has closed as a result of a Government direction, because of a general notifiable infectious disease, the Minister believes that Government advice to close a business amounts to the same thing.  

“He believes that insurers should not try to distinguish between these situations, where there is a general infectious disease provision in a policy, in order to avoid payment of claims,” a spokesman said.

“In this regard, he believes the Government’s direction to childcare providers and its advice to pubs and clubs to close is sufficient for those businesses to be able to make a claim on their insurance where the appropriate business interruption cover is in place.”

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