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If Ireland’s populist Sinn Fein party manages to form a government, Apple Inc., bankers and real-estate companies may be among the biggest losers.
The party, which won the popular vote in Ireland’s general election last week, is opening discussions with others to try and form a coalition. There’s no guarantee it will find enough allies, with the established parties of Fine Gael and Fianna Fail wary of the Sinn Fein’s past links to the IRA terror group and its economic polices
Fianna Fail leader will seek to create a possible government with all parties except Sinn Fein, Irish media said Friday. Nonetheless, the election results spooked investors, sending bank and real-estate shares plunging. Here are a few of of those who stand to lose from a Sinn Fein-influenced government.
One of the country’s biggest employers, Apple was hit with a 13 billion-euro ($14.13 billion) tax bill in 2016 from the European Commission, which said it got a sweetheart deal from the Irish state. Until now, the Irish government has vehemently denied any wrong-doing and is appealing the decision.
Sinn Fein criticized the government for fighting the case, saying the money should be accepted as a windfall to build homes and hospitals. It wants to stop the appeal, a move which would likely prove politically popular. However, it’s not clear that Ireland dropping its fight would end the matter. Apple is also appealing the decision, and that may well continue no matter what the Irish decide. Sinn Fein and any potential coalition partners would also need to carefully monitor whether such a move would jeopardize the 6,000 jobs the company provides in Ireland.
Ireland’s economy is underpinned by foreign direct investment, with companies like Facebook Inc. and Google Inc. employing thousands in Dublin and elsewhere. Many of these jobs are highly paid, and so may be hit by Sinn Fein’s plan to raise taxes on employers and the wealthy.
For example, the party wants to introduce a 15.75% rate of employers’ social security on the portion of salaries over 100,000 euros, bring in a 5% levy on individual incomes above 140,000 euros and abolish a tax break for the “wealthiest” workers at multinationals.
There may be some push back from potential coalition partners, who might argue such measures would hurt foreign investment and eat away at the tax base. However, the party might be tempted to push on regardless, given the likely political dividend of taxing the better off.
A stream of senior bankers such as AIB Chief Executive Officer Bernard Byrne have exited over the last two years, and that’s the put a spotlight on government pay policy in the sector.
Bonuses are banned, and salaries capped at 500,000 euros per year for lenders that were bailed out by the state during the financial crisis. The government commissioned a report which set out the case for easing constraints on bankers’ compensation, and Finance Minister Paschal Donohoe was considering his next move when the election was called.
Now, it’s quietly accepted the prospect of any changes in the medium term is dead. During the campaign, Sinn Fein has made clear it wants the bonus ban to remain, and with pay still a lightning rod for taxpayers forced to bail out the banks, no coalition partner is going to argue against them.
In the wake of the bailout, a tax was placed on the sector. Sinn Fein wants to increase that levy, to raise an extra 50 million euros a year, and stop lenders offsetting tax bills with historic losses. It also wants to give the nation’s central bank power to cap mortgage rates and keep the government’s majority stake in AIB.
Much of this would be politically popular, but again may not necessarily be straight forward. For example, banks could legally challenge any effort to treat them differently from other kind of companies. Even then though, the banks would likely hoard capital and ease back lending just in case things went wrong.
Sinn Fein wants to raise the rate of commercial stamp duties to 12.5% from 7.5%, pushing builders and developers to construct homes rather than offices.
It also wants to cut rents by as much as 1,500 euros a year, and freeze rents for three years. This too, may not be easy. One potential coalition partner, Fianna Fail, backed away from such a proposal during the campaign, arguing it was legally impossible.
(Adds government formation developments in third paragraph)
--With assistance from Peter Flanagan.
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To contact the editors responsible for this story: Chad Thomas at firstname.lastname@example.org, Morwenna Coniam, Richard Bravo
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