Wednesday, November 30, 2005

Political Influence of the Super-rich

In my posting "Traveller Rights" yesterday, I made an exception of the super-rich - a minority who most definitely are not politically powerless.

In this regard, I had in mind a couple of"minorities of one" i.e. Tony O'Reilly & Ken Rohan, both of whom had specific legislation enacted on their behalf.

In O'Reilly's case it allowed the Eircom ESOT (Employee Share Ownership Trust) to accept his consortium's bid without triggering a major capital gains liability, effectively scuppering Denis O'Brien's competing bid.
O'Reilly had no telecoms background, was backed by venture capitalists who would be looking to sell out within 5 years and his bid was mainly funded by borrowings rather than capital, secured against the assets of the business and repaid from the earnings of the business. This appproach encourages a short-term owner to sweat the assets and minimise capital investment.
O'Brien, on the other hand, is a proven telecoms operator and the much larger capital element of his proposed financing structure was indicative of a long-term commitment to developing the business.
This was obviously on no interest to the Fianna Fail-led Government. It truly was "Payback Time" as a famous Indo front-page editorial had wisely predicted.

In the case of Rohan, he had furnished his modest home "Charleville" in Enniskerry with very expensive antiques and art which were owned by his company. The Revenue had assessed him as having a BIK liability which was reported to exceed €1m.
In the 1994 Finance Act, Minister for Finance Bertie Ahern introduced an amendment to remove this BIK tax liability. Not only that, but the relief was made retrospective to 1983! At the time it was reported in the media that Ken Rohan was the sole known beneficiary of this amendment.

Rohan had contested the Revenue assessment of BIK libility, but the very fact that the Government deemed it necessary to amend legislation would suggest that the Revenue had a fairly good case in the first instance. Needless to say, Ken Rohan was and remains a Fianna Fail donor.

What's particularly interesting is that we are repeatedly told that legislation cannot have a retrospective effect. Thus, when it comes to unwinding some of the tax shelters which are used by the super-rich to avoid tax, we are told these have to be allowed to run their course. Yet when it comes to looking after their own..........

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