Introduction
Good Afternoon ladies and gentlemen, honoured members of Chartered Accountants Ireland.
Thank you for welcoming me here today.
I would like to start off by acknowledging the success of the President of the Institute, Feargal McCormack, at the British Accountancy Awards in September.
His firm, PKF-FPM, took home no less than three awards.
For an independent Northern Ireland based firm this is a phenomenal achievement and I congratulate you and all your colleagues.
I am aware that a number of you here today are finance professionals from the public service and are members of other Accountancy Bodies such as CIPFA, CIMA and ACCA. You are most welcome.
Great Brunswick Street
Every time I have had the opportunity to walk through the gleaming, striking facade of this building I am minded to reflect on what a strong vote of confidence in the future of your organisation the redevelopment of Chartered House was.
Right here in the centre of Dublin this pioneering headquarters, education and training centre forms a bold canvas for your work in the years to come.
Indeed the ground on which we stand has a long storied strand in the grand history of our fair city.
An almanac from 1862, not long before the Chartered Accountants of Ireland was established by Royal Charter in 1888, shows that this area was a hub for a wide variety of occupations from gas light inspectors to coal merchants.
They were all important professions of the age. Key enablers for the society and economy of the time to function.
What is Accountancy in 2018?
Popular culture loves a good stereotype. A caricature of a profession and those who practise it.
The old impression of your profession sitting in their back offices, totting up figures and speaking a language that largely unintelligible– does this resonate with what accountancy is in 2018?
Standing here with you today in Chartered House, looking out onto an audience of dynamic female and male business leaders and shapers, I don’t think anything could be further from the reality.
Accounting is not some staid, Dickensian craft.
Accounting is the language of business.
At the Centre of the Economy
You are at the centre of our economy, at the crossroads of a multitude of different companies and sectors.
Your profession is endlessly dynamic, rewarding and challenging.
The accounting, auditing and other services institute members provide allow Governments, investors, shareholders, employees and citizens to see through the fog and perceive the economic reality and the opportunities within.
I have spoken before on how we lost our sense of economic reality during the Celtic Tiger.
We lost track of the fundamentals of what a successful stable economy and society should and could be.
We sacrificed transparency and real innovation for something that was not real.
Years of hard work, sacrifice and prudent decision making has us back to strong economic growth and back in control of our finances.
But we must not forget lessons we have learned the hard way.
That we cannot bet our prosperity and society on unsustainable illusions.
Accounting is the language of business and economic reality. It is the base upon which all sustainable and innovative economies are built.
You must be the vanguard of speaking this language fluently and audibly.
Of applying the many improved and reformed accountancy standards and rules which our economies and societies needed and demanded.
But more than that the institute is a key hub and incubator for a new culture of clarity, transparency and passion.
Paul Collier, the Oxford based economist writes the following of institutions in his new book ‘The Future of Capitalism’ that “institutions encapsulate the accumulated social learnings from a range of experience too vast to be known by any individual”.
This is a key role for all of you, of supporting professionals in their development for norms and standards.
Norms where diversity of thought and innovation go hand in hand.
Our regulators have spoken extensively of the importance of culture in financial services firms.
But I believe true cultural change is impossible if the practitioners and decision makers do not reflect our society.
To that end I am pleased to see the institute representing and encouraging opportunity for your female members.
One third of the governing council is female with a membership split of 60/40 male to female.
The student body is currently 51% female. This is a great indicator of the future but the systems must be put in place to allow the female leaders of tomorrow to step forward.
I am also heartened to see members of the institute as well as other accountancy bodies work and contribute to the public sector.
Indeed a number of my parliamentary colleagues are members of the institute.
Given how valuable the skillset set and perspective you possess is, I feel obliged to say what a huge contribution more of you could make to a public service which is rapidly modernising, changing and professionalising.
So if the opportunity came to serve and it worked for you please do consider it.
These are my challenges to you.
That is societies challenge to you. As an institute, as professionals and practitioners of the future.
To be leaders of transparency, diversity and innovation.
The Economy
Speaking of economic realities, thankfully ours is a much improved one.
Our economy is in good shape, the latest data confirming that the strong growth we have experienced over the last number of years has continued into the first half of 2018.
Importantly domestic demand is now making a positive contribution to growth, reflecting the rising levels of consumer spending and the sustained investment by Irish businesses.
I am proud to be able to say that the strength of our economy is nowhere more apparent than in the labour market.
Job creation has continued at a robust pace over the last number of years, as a result there are now more people in work than ever before.
Greater employment opportunities have in turn helped to reduce the unemployment rate which is now at its lowest level in a decade.
The positive economic outlook in the recent budget should support the creation of 62,000 additional jobs next year.
Whilst the unemployment rate is expected to fall to just over 5 per cent.
We should not lose sight of the profound impact this has had on our nation and our people.
Every job added is a potential job seeker back on his or her feet and participating in the real economy.
A school leaver starting to make their way in the world.
A household building a better future for itself.
Risks Remain
The strength of our economic recovery and the positive outlook for the years ahead reflect, not only the hard work we have endured as a nation but also the benefits we have enjoyed as a small open economy.
However our openness also means that we are particularly exposed to a number of risks in the years ahead:
First and foremost there remains significant uncertainty around the outcome from Brexit;
Secondly, given the importance of the traded sector in the Irish economy, any disruption to world trade, in particular from increasing protectionism, could significantly impact Irish growth prospects;
In addition, a faster-than-expected normalisation of monetary policy in the euro area or changes in other jurisdictions that affect the competitiveness of Ireland’s corporate tax regime all have the potential to constrain our growth trajectory.
As we cannot directly control these risks, we must focus on mitigating against them. The best way to do so is through the prudent management of our public finances and by focusing on competitiveness-oriented policies.
By dealing with economic realities and not unsustainable illusions.
The strength of the economic recovery has been reflected in our public finances. In 2019 we will reach an important milestone, balancing the budget for the first time in a decade.
However this is not an end in itself, it is imperative that we continue to enhance the resilience of our public finances to ensure sustained economic growth.
That is why we are establishing the Rainy Day Fund.
The Fund will be capitalised with €1.5 billion from the Ireland Strategic Investment Fund and supplemented with an annual contribution of €500 million from the Exchequer starting from 2019.
Some of the historically high levels of corporation tax will be set aside for the purpose of capitalising the Fund.
We have not forgotten the lessons learned from the crisis.
Brexit
You will be well aware of the recent significant developments on BREXIT.
After a lengthy negotiation process, a draft Withdrawal Agreement between the United Kingdom and the European Union has been agreed.
Importantly, this agreement satisfies our national priorities set out at the outset of the Brexit negotiations, namely to;
Protect the Good Friday Agreement
Maintain the common travel area and related benefits
Reaffirm our place at the heart of the EU
And protect trade, jobs and the economy
Of course, we cannot become complacent.
The risk of disorderly Brexit remains ever-present until the final text is ratified by both the UK and the EU.
Irrespective of the future relationship between the UK and the EU, we will face a very different world once the UK does depart.
The UK will inevitably become a ‘third country’.
The status quo will change.
Both Government and business will have to embark on this journey into this new world.
Although we will inevitably face many obstacles along the way, I am confident that working together we can and will overcome these challenges.
The International Focus and Team Ireland
A key part of overcoming this challenge is making sure we continue to build relationships.
The UK will remain a key relationship of course.
I know this remains a key priority for the institute and your President.
Feargal, as Managing Director of a thriving practise with offices on both sides of the border, you know what’s at stake and I am pleased that you have been such a strong voice for the business community in Northern Ireland.
And we need to continue to look to increase our engagement and partnerships within the EU and further afield.
And a key part of this is our diaspora.
In 2015 the previous Government published the first comprehensive articulation of national policy towards the Irish diaspora around the world.
A key part of this strategy is using our global scope to amplify the reach of partners like the Institute.
I was pleased to see the Institute engage so actively with our embassy network on the way to and during the World Congress of Accountants in Sydney earlier this month.
I note that Feargal met diplomats and local members in Abu Dhabi, Dubai, Sydney, Melbourne and Singapore.
And I see that he welcomed the 27,000th member of the Institute at a function at the Ambassador’s residence in Abu Dhabi.
I spoke before of accountancy as a language.
It is also a passport.
And nothing indicates that more than a successful young accountant receiving her membership of the Institute whilst living and working in the UAE.
Taxation Reform
As with accountancy rules and standards, our taxation system is evolving to reflect the changes in how we do business.
Bigger and increasingly globalised and digitalised companies need a tax system to suit.
Corporation tax, and global tax reform, remains very high on the international political agenda.
The OECD BEPS process has been the vehicle for major corporate tax changes in recent times and although its implementation is still in its early stages we are already seeing some fruits of that work beginning to emerge.
However it is important to understand that the international tax landscape is continuing to change and the key question remains as to how this can be achieved in the safest way possible.
My view, from the perspective as an open, small economy, is that this is best achieved by global consensus at the OECD.
So while change is inevitable, I believe that any changes must be designed for the long term.
for a situation whereby the call for quick fixes in this area are met is a cause for concern.
My concern is that some of these proposals are short-sighted and may cause difficulty in the longer term.
I do not support short-term measures nor do I support measures that transform corporation tax from a tax on profits to a revenue based tax.
I believe that the BEPS project shows us the best way to move forward – seek global agreement at the OECD and then seek to implement measures domestically, bilaterally and, where appropriate, through EU Directives.
For Ireland to have a credible voice in international discussions we must do our part in implementing the BEPS agreements.
Ireland has been an enthusiastic participant in the BEPS process from the start as a means of addressing the most egregious aspects of aggressive tax planning.
I published the Corporation Tax Roadmap in September to outline the substantial actions that we in Ireland have taken and will continue to take on international tax reform, some of which were announced in the recent Budget and are included in the current Finance Bill.
This year’s Finance Bill includes important legislation on Controlled Foreign Company rules and Exit Taxes.
The ratification of the Multilateral Instrument in this year’s Finance Bill is also an important step in Ireland playing its part, and it is expected that the final step in ratification will be taken in January next year.
We are already working towards implementing our future commitments and my Department published a detailed consultation paper on other aspect of the Anti-Tax Avoidance Directive very recently.
I trust that many in this room will be among those contributing important submissions to this consultation.
I would also highlight that role of industries and the professions is also important in the ongoing global debate.
Your profession has a key role to play and I would encourage you to engage positively by contributing to the ongoing international tax debate to ensure we end up with a system which addresses the challenges arising from the digitisation of the economy in a way which makes it fit for purpose and fair to all.
Conclusion
We live in challenging times.
As we look to the future, we must be cognisant of the elevated risks posed by Brexit, in addition to the risks posed by increasing protectionism and changes to the international tax landscape.
Given these challenges over the horizon, the government remains committed to ensuring that our economy is as resilient in bad times as it is dynamic in good times.
We are striving to run our economy, to set policy, to deliver public services in the best way possible.
And we ask the same of the Institute.
To be champions in this new era of transparency and innovation and diversity.
To think big and wide and to help others do the same.
To lead the way in best practise, to contribute to public discourse and to be partners and positive influencers within our economy and society.
Thank you.