Thursday, 17 May 2012
Companies (Amendment) Bill 2012: Second Stage
I am pleased to bring the Companies (Amendment) Bill 2012 before the House and I thank Senators for facilitating the debate as an urgent issue.
This Bill proposes a small number of focused changes to company law in the interests of maintaining a dynamic and flexible operating environment particularly for US companies. This is in keeping with the spirit and tradition of responsiveness of company law to continually evolving corporate circumstances. The body of company law at this time comprises some 15 Companies Acts, and it is not standing still. My Department is currently involved with a major legislative project on the reform and consolidation of company law to which I will return later. I believe that Bill will run to 2,500 sections and will delight Senators when it comes to the House. The ambition is to make Ireland one of the best places in the world in which to establish a company.
The Bill before the House amends those provisions of the Companies (Miscellaneous Provisions) Act 2009 which permit the use of US accounting standards - referred to as "US GAAP" in the preparation of the accounts of a specified category of company and allow for the prescription of the use of other internationally recognised accounting standards. Without changing the eligibility criteria, the Bill extends both the timescales relating to the availability for use of US accounting standards and the period for which an individual company can avail of this provision. There was a sunset clause and a maximum period that companies could use, both of which are being amended. It also correspondingly extends the periods in respect of the provision in that Act for prescription of other internationally recognised accounting standards.
The present measure can be seen in the context of the Government's policy of encouragement and facilitation of foreign direct investment. The importance of foreign direct investment to the economy remains highly significant. FDI accounts for a total of 250,000 jobs, which is one in every seven, in Ireland. The immediate outlook for Ireland's foreign investment portfolio is exceptionally good. To date in 2012 there have been 25 investment announcements with the potential to create more than 4,000 jobs. It is encouraging to note that notwithstanding the economic downturn, Ireland continues to be an attractive location for foreign direct investment and that so many companies are prepared to undertake and announce these investments in Ireland.
FDI has a major role to play in the current situation where Ireland is in the process of emerging from a period of unprecedented financial turbulence and where critical stages in that process still lie ahead. However, there is widespread acknowledgement of and admiration for the progress we have made on this difficult recovery. This Government has been operating on a wide variety of fronts in addressing the task of repairing our economy and restoring our international reputation. We are engaging with our European colleagues, the United States and many other countries to demonstrate that Ireland is squaring up to its economic difficulties, and has the intent, resolve and imagination to overcome them.
The restoration of Ireland's fortunes is an incremental process in which we all have a role to play. It has occupied much of my time since taking office last year. For example, I have undertaken eight major trade investment missions in that time, involving either IDA Ireland or Enterprise Ireland, in the course of which I have met representatives of companies from both sides of the United States, Saudi Arabia, India and China. This has given me the opportunity to promote Ireland's many strengths and its strategic location as a gateway to the European market. There has been strong interest in all aspects of what Ireland has to offer, including our skilled workforce, our pro-business environment, our tax offering, the base of multinational companies already here, and our embedded links with Europe. Ireland is open, ready and eager for business and investment, and my hope is that this will lead to more jobs being created in Ireland in the near future.
Ireland's FDI landscape has continually undergone its own transformation, scanning the horizons of enterprise focusing on and securing FDI using novel technologies, innovative business models and new markets. Ireland has evolved from being a location based originally on manufacturing to rebranding ourselves as the "young Europeans", through to the model of the smart economy built on the dual strengths of our innovativeness and entrepreneurship.
On a global scale, Ireland scores extremely well in many of the areas of importance to investors, helping drive FDI. The IMD "World Competitiveness Yearbook 2011" ranks Ireland first in the world for corporate taxes, first for business legislation for foreign investors and first for the availability of skilled labour. The same report also ranks Ireland second in the world for consumer price inflation, third for direct inward investment flows, third for availability of finance skills, fourth in the world for labour productivity and fourth for exports of commercial services. The World Bank "Doing Business Report 2011" ranks Ireland first in the eurozone for ease of doing business, while Ireland is ranked second most attractive country globally for foreign direct investment by the "NIB/FDI Intelligence Inward Investment Performance Monitor 2011".
Ireland, as a member of the European Union offers international investors a stable political and economic environment and a sophisticated, well-developed corporate, legal and regulatory environment. The quality of our economic regulation is a significant factor in our competitiveness and growth. It is critical, therefore, that we have the capacity to respond to economic circumstances as they unfold in a way that is both strategic and reflective of the evolving needs of business and investors. Those companies with a presence in Ireland and availing of the US GAAP facility under the 2009 Act provide significant employment here which the present measure should help to consolidate, with the possibility of further jobs being created, particularly if the economic situation in export markets picks up over time. These companies are involved across a range of industry sectors, including health care, technology and services.
As mentioned earlier, the Bill allows for the US GAAP facility and the provision for prescription of the use of other international accounting standards, as provided for in the Companies (Miscellaneous Provisions) Act 2009, to be extended from the financial year ending on 31 December 2015 until 31 December 2020 with a removal of the restriction of a four-year maximum period for the use by a beneficiary company of either of the provisions.
The present proposal is a response to a strong approach to me from a number of US multinational companies, most of which have a significant operating presence in Ireland, requesting a prolongation of the "US GAAP" facility provided for in the Companies (Miscellaneous Provisions) Act 2009. The request has a basis in delays in the process of international convergence of these US GAAP accounting standards with International Financial Reporting Standards, IFRS, which is lagging behind the expectations we had in 2009, as well as the restriction of the time period allowed for use by a beneficiary company of US GAAP in the 2009 Act. The present situation as regards the US Administration's attitude to this standards-convergence process or to a move to permitting this category of company to list in the US using IFRS accounting standards continues to be inconclusive. While it will clarify over time, it is difficult to predict with accuracy when this may be.
The four-year maximum period allowed to companies to use US GAAP under the present legislation means that a number of the companies seeking the extension would be faced with having to put measures in place, as of the present time, to provide for the move by them to preparing accounts under IFRS. While the companies' entitlement under the 2009 Act does not expire until 31 December 2012, a considerable lead time is required for the necessary groundwork to be undertaken to provide for taking on a very different set of accounting standards, if this is required. These companies, which are listed on US exchanges, need legal certainty now as to whether the extension of the time-related elements of the US GAAP facility is being permitted from a number of perspectives, including considerations of the corporate risk and corporate obligations requirements of the US Securities and Exchange Commission, and shareholders.
If the requested facility were not granted, significant costs and resource implications are entailed for these companies. Appropriate mechanisms would need to be in place to provide for the preparation of accounts under IFRS and subsequently applied in the production of these accounts using these standards. It would be particularly onerous and expensive for a company if the obligation to convert to IFRS were to arise over a relatively short period. Furthermore, these companies would still be required to produce accounts using US GAAP and report to the US Securities and Exchange Commission, in order to remain compliant in the US. A requirement to produce two sets of accounts would prove costly and burdensome for these companies.
The legislation is designed to facilitate multinational companies that have operations in Ireland to consolidate, and if possible, add to activities. Such developments would further contribute to economic activity in Ireland and provide valuable employment opportunities. The legislation which I am now introducing, therefore, provides for the extension of the use by this restricted category of companies of US GAAP as provided for in the Companies (Miscellaneous Provisions) Act 2009 until financial years ending at the latest on 31 December 2020.
The restriction on the use by the relevant parent undertaking of this facility to four years is removed. In the interests of maintaining the flexibility provided for in the 2009 Act, I am extending the enabling provision for ministerial prescription of other specified internationally recognised accounting standards if such a demand arose and was considered appropriate to do so. This term of this extension will parallel that for US GAAP.
A significant point to make is that companies will continue to be subject to Irish company law generally, including of course all the provisions which relate to accounts. In fact, Irish company law will override any provision of the US GAAP which may be in conflict with the Companies Acts. Allowing these companies to prepare their Irish accounts using US accounting standards for a further period of time would eliminate the significant duplication of cost and effort of preparing two sets of accounts under two different sets of accounting standards. It will also create a bridge to span the period during which significant international developments may occur relating to the convergence of US and international accounting standards.
I will now turn to the details of the Bill. Section 1 is the interpretation section. Section 2 provides for the extension of the use of US GAAP as provided for in the Companies (Miscellaneous Provisions) Act 2009 by certain parent undertakings which are defined in the section. This is subject to the proviso that the use of those principles in the preparation of the undertaking's accounts does not contravene any of the provisions of the Companies Acts or any regulations made thereunder. The accounts in question are the company's group accounts and the individual accounts.
As heretofore, this arrangement will be limited to a specified category of companies. In addition to existing beneficiary companies, the specified category of companies also comprises parent companies incorporating in Ireland for the first time whose securities are not traded on a regulated market in the European Economic Area, EEA; whose securities are registered with or who are subject to reporting to the US Securities and Exchange Commission, SEC, and who, on the date that this Bill passes into law, have not already incurred an obligation to file their first accounts with the Registrar of Companies. The section also provides for this arrangement to apply from financial year ending at the latest on 31 December 2015 until financial year ending at the latest on 31 December 2020, with the four year restriction for a beneficiary company removed.
Section 3 extends the Minister's power to make regulations to prescribe other specified internationally recognised accounting standards under which specified categories of companies may prepare accounts from financial year ending on 31 December 2015, as provided for in the 2009 Act, up to and in respect of financial year ending on 31 December 2020 at the latest, with the four year restriction for a beneficiary company removed. The criteria applied under the 2009 Act remain. These require that any such regulations shall specify the accounting standards, which shall be internationally recognised, and generally accepted accounting principles or practices of a jurisdiction where a majority of the subsidiaries of the parent undertaking have a substantial connection or where the market is situated on which the shares of the parent undertaking are primarily admitted to trading. In preparing accounts using other internationally recognised accounting standards companies must not contravene any provision of the Companies Acts or any regulations made thereunder.
Section 4 is a standard provision and simply contains the Short Title and provides that the Act and the Companies Acts shall be read as one.
I referred earlier to the ongoing major review and consolidation of the suite of Companies Acts being undertaken in my Department, and I welcome this opportunity to brief Senators on the status of this major project. The Companies Bill will consolidate existing Irish company legislation dating from 1963 and introduce several reforms. The proposed Bill will consolidate the existing 15 Companies Acts, or 16 when the Bill currently before the House becomes law, dating from 1963, as well as other regulations and common law provisions relating to the incorporation and operation of companies, into a single Act, which is expected to comprise some 1,400 sections.
Parts 1 to 15 of the Companies Bill, which correspond to "Pillar A" of the general scheme, were published in soft copy format on my Department's website in May of last year. Parts 1 to 15 contain all of the law relating to the most common company type in Ireland, the private company limited by shares. These Parts comprise some 952 sections, together with 6 Schedules, and represent over two-thirds of the entire Companies Bill. I decided to publish Parts 1 to 15 in May 2011 to afford stakeholders, including business owners, practitioners, advisers and representative bodies, an opportunity to become familiar with the proposed new legislation. In summary, the provisions of the Bill cover the incorporation of companies, corporate governance duties of directors and secretaries, financial statements and auditors, receivers, reorganisations, examinerships, windings-up and compliance and enforcement. The provisions are brought together in a coherent structure which will facilitate business people in incorporating and operating companies on a day-to-day basis.
The Bill also modernises company law to reflect modern business practice. Given that almost 90% of companies in Ireland today are in the form of a private company limited by shares, the Bill sets out all of the provisions relating to that type of company in sequential Parts. In subsequent Parts the provisions for the private company limited by shares are modified for other company types such as public limited companies, PLCs, and guarantee companies. Furthermore, to promote compliance with the law and to protect members and creditors, the Bill also sets out clearly the duties of, for example, directors, company secretaries and auditors, including corporate governance duties. The Bill also sets out the functions of the Companies Registration Office, the Office of the Director of Corporate Enforcement and the Irish Auditing and Accounting Supervisory Authority in ensuring compliance with the law and brings together the provisions relating to compliance and enforcement such as company investigations, compliance and protective orders, disclosure orders, disqualification and restriction of directors and prosecution, offences and evidential matters.
I am happy to inform Senators that drafting of the remaining Parts of the Bill - those corresponding to "Pillar B" - is at an advanced stage, and I hope to be in a position to publish and introduce the Bill into the Houses towards the end of this year.
In conclusion, the extension of the time lines both in the US GAAP provision and in the scope to designate other internationally recognised accounting standards is a facilitative measure which signifies the Government's practical and active approach to industrial promotion and stimulating foreign direct investment. I commend the Bill to the House.
I welcome the Minister and compliment him on his speech. It brings us up to date on the agenda of the Government to make Ireland the best place to do business. The Minister gave a first class presentation on the up-to-date position.
As the Minister pointed out, one in every seven jobs in the Irish economy is the result of direct or indirect foreign investment, but 99.99% of Irish people do not realise that. After all the years of foreign direct investment, and the continued success of that investment in Ireland, most Irish people still do not realise the contribution it makes. It is positive for Ireland that despite our and Europe's financial woes companies considering investing abroad are still very happy with what is happening in Ireland. At present, they are the drivers of our economy and are keeping it stable. I congratulate the Minister on the work he has done in going around the world to spread the story of Ireland and in retaining international investors' confidence in this country.
The Bill extends the period in which companies can avail of using a different accounting standard from the accounting standards that prevail in Ireland. The exception was introduced in the Companies (Miscellaneous Provisions) Act 2009 by Fianna Fáil. It was part of an evolving economy that kept up its standards for attracting investment. One of the secrets of Ireland's success has been that no Government or political party, for a long time, has had a divergent view on how the economy should be developed. We are all in agreement on the importance of foreign direct investment. The extension of the period is necessitated by delays in the convergence of two international accounting standards, the US generally accepted accounting principles, GAAP, and international financial reporting standards, IFRS.
By extending the definition of relevant parent company or undertaking, this Bill includes companies which had not been required to make an annual return to the registrar of companies before the date on which the Bill comes into operation or those companies which used US generally accepted accounting principles in accordance with the 2009 Act since 23 December 2009. The Bill also extends the expiry date which currently applies to the use of US generally accepted accounting principles. At present, this is limited to four financial years, with an expiry date of 31 December 2015. The amendment contained in the Bill will alter this by removing the four-year period and imposing an expiry date of 31 December 2020. The Bill also amends the timeframe within which the Minister for Jobs, Enterprise and Innovation may make regulations under section 2 of the 2009 Act. Currently, the Minister may make regulations allowing for the use of other internationally recognised accounting standards. These regulations are subject to the time limits and expiry date set out in the 2009 Act. The amendments contained in the Bill alter the wording of section 2 of the 2009 Act to reflect the removal of the four-year period and the extension of the expiry date from 2015 until 2020.
Standard accounting practices require companies to follow certain accounting rules when presenting financial statements in order that the readers of the statements can comprehend the financial health of the company. Unfortunately there is no worldwide agreement on the accounting rules and standards vary for different countries and for different types of companies within a country. Some commonly used accounting standards include the generally accepted accounting principles of the United States, which are known as GAAP, as well as the United Kingdom's generally accepted accounting principles, which Ireland follows. This standard is known as UK generally accepted accounting principles or occasionally as Irish generally accepted accounting principles. There also are the generally accepted accounting principles of France and the international financial reporting standards, IFRS, which also are used in Ireland. The lack of uniform accounting standards is particularly problematic when a company works across borders and under two different accounting standards. As for convergence of such accountancy standards, work is ongoing by global accounting bodies to unify the US generally accepted accounting principles and the international financial reporting standards. While it had been hoped these two standards would be unified by 2015, the delay in the harmonisation process necessitates this Bill to give companies confidence as to their future accounting rules.
In conclusion, this Bill eliminates inherent waste and the burden of red tape, which is the bête noire of businesses and companies that are trying to invest and move fast on delivery of their projects. Mr. Sean O'Driscoll of Glen Dimplex recently appeared before the Joint Committee on Jobs, Social Protection and Education and it would be worth the Minister's while to study his contribution. He raised the point, in an excellent speech drawn from his own practical experience, about the number of regulations made here that inhibit businesses from developing. Allowing companies under certain circumstances to use the US generally accepted accounting principles framework makes Ireland a more attractive destination for foreign direct investment companies. I thank the Minister and wish him continued good luck on his journey.
The provisions of this Bill will be welcomed by companies operating in Ireland. The Minister has outlined how they made known to him their opinion on the need for this Bill. It is highly pragmatic legislation to ensure that companies, most of which probably are American companies operating here, can continue to use both accounting standards and that both would be accepted. The proposed revisions and the extension to the time within which such companies will be allowed to prepare their accounts under the framework that applies in the United States rather than the Irish or United Kingdom standards, was to have expired by the end of 2015. However, as previous speakers have noted, this deadline is to be extended to 2020, within which timeframe such companies can avail of the facility.
The first advantage comes with the elimination of red tape and the necessary savings that will accrue to companies when preparing end-of-year accounts. I noted a media reference to the effect that an estimated €15 million per annum can be saved by companies and while that figure was subjective, it probably gives an idea of the ballpark. In addition to facilitating the reduction of red tape and saving time and money companies otherwise would be obliged to spend preparing end of year accounts, it also avoids confusion. It is important for companies to have a single set of accounts for investors, shareholders and the public. The case of a German company, Daimler-Benz, has been highlighted in this regard. It was first listed on the New York Stock Exchange in 1993 and while the company's end-of-year reports under German standards would have shown a profit of DM 615 million, under US standards it showed a loss of DM 1,800 million. In itself, this example makes the case for the need for a single set of accounting standards to avoid confusing the public and would-be shareholders as there is a significant difference between the two standards. In an ideal world and in a global sense, it would have been ideal to have in place a single set of accounting standards. This matter was exercising G20 leaders, who set a deadline of the end of June 2011 to ensure the establishment of a single global set of accounting standards. However, the deadline has passed and this has not happened.
I note that in general, reporting here is done under the IFRS system. While it will be important to achieve such certainty internationally, on reading the background material prior to making my contribution today, I learned some doubt exists as to whether such convergence can or will occur. I hope it will but as it is out of Ireland's control, it is important to introduce pragmatic legislation such as this Bill. I understand that financial instruments and insurable contracts are the challenge and are at the nub of the issue.
I refer to the differences between the US GAAP and the IFRS model that operates in Ireland and across Europe. An interesting summation is that the United Kingdom model, on which Ireland's model is largely based, is largely Victorian in origin and is based on absentee shareholders for whom the profits were important and who were far removed from the decisions made. However, the United States system derives from the period after the crash of 1929 and much legislation was introduced during the 1930s. For example, the Securities Exchange Act 1934 established the Securities and Exchange Commission. Regulation is geared towards decisions at a lower level of involvement of shareholders and a lower level of stewardship in the accounting world. It is geared mainly towards larger companies that are listed, rather than towards smaller companies. Constantly, there are significant differences between the US GAAP and the IFRS, which is the system under which Irish companies generally operate. There is divergence and broadly speaking, two international standards operate. Ensuring certainty through having a single system will require the bringing together international expertise. From a global perspective, this would be ideal, particularly as borders now are disappearing and there are so many international stock markets. In this context, it is important for companies, investors shareholders and the public to have certainty and a single system.
I welcome this Bill, although the number of sections is daunting and I am sure it will be challenging for Members. However, it is important for this country because of the difficulties we have experienced. A message must be sent out that Ireland is a place in which standards of the highest level are required on an international basis. Such a message must be sent out from the perspective of investment and to have certainty. The Financial Regulator, Matthew Elderfield, has gone a long way towards ensuring the sending out of a strong message to the effect that Ireland is a place in which one can do business and where standards of the highest possible level are required.
I welcome that the investigation by the Governor of the Central Bank, Professor Patrick Honohan, into the Irish banking crisis found in some cases auditors and accountants should have been much more alert to weaknesses. I welcome also that the Chartered Accountants Regulatory Board, under the chairmanship of Mr. John Purcell, former Comptroller and Auditor General, is also undertaking an investigation in this regard. Such investigations are important. As we move forward in consolidating and developing company law, it is important standards are clearly spelled out for all those involved, including directors who are not merely members of boards but who, because of their particular expertise, have been appointed to cast a watchful eye over accountants, company secretaries and so on. Standards are important for a country which aspires to being the best small country in the world in which to do business. We need to send a strong message in this regard.
The EU Commission directive in respect of auditing, on which consultation is currently taking place, refers to the need for auditors to be rotated, an issue highlighted in the many incidences which have occurred recently in this country. There are many areas in respect of which we need to take action. I look forward to publication of the companies Bill towards the end of the year and to our discussions around it. The Bill before us is pragmatic. It is a sensible piece of legislation in terms of the extension of the timeframe to 2020 in order to give certainty to foreign direct investors coming here. As the Minister stated, they are an important part of our economic recovery. Their interaction with our indigenous companies has been positive. I recently attended a breakfast meeting in Cork at which the chief executive of IBM Ireland spoke about the reasons that company is in Ireland. While our corporation tax rate is important to IBM Ireland, it is here because Ireland is a member of the European Union which has in place a strong regulatory regime and an excellent skilled workforce. In my view, this legislation is a no-brainer. It is hoped that we will, before we reach 2020, have in place internationally recognised regulatory standards world wide, thus there will be no need for this dual set of standards.
I welcome the Minister to the House. I found the Minister's figures interesting, in particular those from the World Competitiveness Yearbook 2011. I am impressed to hear that Ireland ranks first in respect of corporate taxes, business legislation, foreign investment and availability of skilled labour, second for consumer price inflation and third for direct inward investment and financial skills. That is interesting information of which I was not aware. It is also a reminder that we are in a competitive marketplace. I have travelled a great deal during the past couple of years, including to Panama and Singapore which are determined to be the most attractive places for small businesses. On that basis, we must remain alert.
I welcome this legislation which extends to US companies the exemption from 2015 to 2020 for filing their accounts under Irish accounting practice. The companies involved are major employees. The last thing we need to do is discourage them or others from locating in Ireland. It seems likely the quality of discourses will not change. This exemption is to be welcomed because the US is such a large employer in Ireland and a massive contributor to FDI here.
On foreign directive investment, can we make it easier to do business and so attract more FDI? According to the British Government, a 2005-2010 programme in the UK reduced the burden of regulatory compliance on businesses by 25%, resulting in a €4 billion saving for firms. I frequently refer to the cutting of red tape to make it easier to do business. However, I have an idea that could allow businesses, including foreign companies responsible for FDI, have a say on regulation, which could be done through e-government. The UK invites comment on regulatory proposals on the website of the Better Regulation Executive. Canada and the US publish guidelines on the evaluation process underlying the cost-benefit analysis of new regulations. In the UK, the "one in, one out" system requires Departments to assess the net cost to business of complying with any new regulation that is proposed - which is an "in". These calculations are validated by the independent regulatory policy committee. If a new regulation means a cost to business, a deregulatory measure - an "out" - that reduces the net cost by at least the same amount must be found. One such "out" is a measure permitting credit unions to communicate with their members electronically. This is estimated to reduce the net cost to business by around £10 million, a calculation validated by the regulatory policy committee. I believe we should not be putting on small business the same burdens as those placed on a multinational, in the same way as the Minister is trying to make it easier for US companies to do business. We could have a public website through which the Government could gather the views of the business community, including foreign companies and the public, and invite practical suggestions for alternatives. Anybody would able to access the website and comment on any particular legislation identified for review. The feedback from those affected by regulation will inform Government decision making. When the period for comments closes Ministers would have a specified period, perhaps two months, to consider the comments provided. This means burdensome regulations would be removed where no good reason for retaining them has been identified. We debated legislation in this House yesterday which dealt with abolition of some old laws that have been on the Statute Book for years. Many of the regulations which were introduced some ten or 20 years ago are no longer needed. This would be a very practical step to show foreign companies that we are making it even easier to do business here.
Could we attract more foreign investors into our marine business? Ireland has the largest maritime area - 220 million acres to land mass - in the EU, yet it derives only 1% of its gross domestic product from the maritime sector. Comparative figures for the UK, Denmark and Norway are 5%, 11% and 20% respectively. Does the Minister or Minister for Communications, Natural Resources and the Marine intend to introduce any further incentives or tax breaks for companies who want to invest in the maritime area? On a related note, why are wind energy electricity producers forced to pump power back into the grid for free while in the UK there is an incentive in terms of producers being paid for power that they generate, which is a source of income for farms and families. If there is no reform of this area, there is much less chance of investment in wind energy, which could help business and the country as a whole. We need to change this provision. I believe it can be changed and that it would be comparatively simple to do so.
Ireland's chairmanship of the Organisation for Security and Co-operation in Europe, OSCE, could bring new opportunities to bring FDI into Ireland and for Irish business to expand. The Tánaiste's visits to OSCE states, where there are conflicts or field presences, will also be important in raising Ireland's profile. These are states in which Ireland is not known. While the primary purpose of these visits must be to aid in conflict resolution,; they also offer opportunities to promote awareness of Ireland in an economic context. Irish businesses active or interested in those countries can expect far greater name recognition for Ireland during 2012 than heretofore. A region of particular importance is Central Asia. Ireland has no resident diplomatic or trade presence in these five states and has traditionally had little contact with them. However, the OSCE is a household name in this entire region and the visit of the chairman of the OSCE, the Tánaiste, will offer an unequalled opportunity to make Ireland a household name too.
I support the Minister in his efforts and I hope he is open to ideas to attract more foreign direct investment here. It is something we can continue to do. I know from what he said today that he is determined to do that and I encourage him to continue with the same energy, enthusiasm and commitment he has shown up to now.
I welcome the Minister and apologise that I missed his opening remarks because I was at a committee. I will not profess to be an expert when it comes to economics, my knowledge of economics is pretty limited. This legislation seems very sensible in that it will remove that onerous task of having to compile to separate sets of accounts. Where I come from, we know how important foreign direct investment is in providing jobs and this legislation can be seen in that light.
Having to complete two sets of accounts is a very onerous task. I agree with Senator Clune that it is a pity harmonisation seems to be taking a very long time. I do not know if it can happen, although perhaps the Minister might have a different point of view. It is a pity we cannot introduce a single set of accounts.
I am sure every Member will know that red tape is a major problem and stumbling block for businesses, even for small and medium sized businesses. It is seen as a barrier in some respects so I commend the Minister on these measures to reduce the amount of red tape for companies.
As Senator Quinn pointed out, we must continue to make this country as attractive as possible for foreign direct investment, especially given the position in which we find ourselves. It is paramount that we continue to attract foreign companies. Our low corporation tax is thrown up every time a referendum is held, we are told it will be abolished and so on. It is hugely important that we continue to bring companies here and this will go some way towards doing that.
The Irish Independent mentioned that the measure will save companies €15 million per year but no source was given for that information. Perhaps the Minister will be able to clarify that for us. If it will save companies €15 million per year, I hope they will invest it in real and tangible jobs. I thank the Minister.
I thank the Senators for their contributions to this debate and, in particular, I welcome Senator White's support for the work in seeking to build international confidence. Through her family connections, she is very familiar with the competitive environment in which we are working. It is true that one of the strengths of Ireland over a long period of time is the consistent political support for an open approach to business investment. We have seen a number of changes in government over the years but a consistent approach has been maintained and investors like that certainty. It is an instructive issue when we come to consider the referendum on which we must vote very shortly. That sense of certainty and political consistency that people know how the Government will treat them over a long period of time is very important, in particular for industries where there is a long lead time on their investments as applies in many sectors, especially the pharmaceutical sector. That level of long-term certainty is vital.
I take Senator White's point about the address by Sean O'Driscoll. I have heard him speak before and I will familiarise myself with the speech he made to the Oireachtas Joint Committee on Jobs, Social Protection and Education to see if we can mine it for practical suggestions.
Senator Clune raised the issue of the unsatisfactory nature of these differences. That is well recognised. I will have to check whether we have the potential during our Presidency of the Councils next year to, in any way, advance the reconciliation of the two systems. Undoubtedly, if that level of cost is being experienced by companies, we need to ensure there is a permanent solution to it, even though we are providing a temporary solution to it here.
I welcome Senator Quinn's point about the initiative for regulatory compliance. That is a practical suggestion and I will see if we can implement it. As the Senator rightly suggested, the provision of, say, a two-month period with the opportunity to consider and comment on the regulatory environment would be very useful. From my Department's perspective, we are very close to delivering the target of a 25% reduction in administrative burdens by the end of the year. Other Departments are applying measurements to the level of administrative burden they create. Where those Departments or agencies have not delivered the 25% target, which is an EU-wide one, they are engaged in developing specific proposals to deliver it. It is an important benchmark which we need to achieve by the end of 2012.
However, this is a continuing area for debate and Senator Quinn rightly pointed out that we need to go beyond the administrative side. Even if we minimise the administrative cost of certain regulations, are they all still necessary? That is a deeper issue and it is also exercising a lot of minds across Europe. There is the issue of what the European target will be after the 2012 target expires. It is very much focused on the narrow administrative side rather than the broader issue of whether the compliance burden is unnecessarily large because we have unnecessary regulations. The Senator's suggestion is one I can go along with to see if we can factor that into our action plan for 2013.
In concrete terms we are already undertaking an audit of licences for the retail sector to see what licences there are and to see if we can simplify them. The Minister of State, Deputy Perry, is undertaking that audit.
I confess that I am not an expert in the marine sector which does not fall centrally within my area. The logic of the statistics the Senator produced, that we only generate 1% of GDP even though we have the highest ratio of sea to land, would suggest there is an untapped opportunity. One of the elements of our action plan for jobs is to look at those sectors. We have identified a number of sectors in the 2012 plan which we seek to develop. The Minister, Deputy Coveney, is acutely interested in this sector.
Wind is another sector in which there are huge opportunities. We have a natural advantage in that sector. The Minister, Deputy Rabbitte, is developing refit price proposals - I do not have the details before me - for onshore wind and biomass delivery into the grid which incorporates incentives into the system. Clearly, incentives constitute a gamble as one is committing to a higher price for a fuel now and asking electricity users to pay more in the hope and expectation that the technology in the long term will be more competitive. Therefore, there is a cost benefit analysis to be done by the State in each such decision. One is making a gamble on the direction of oil prices in asking industry and households to pay more in the interest of a gain later.
here is a balance to be struck in such calculations because we must be conscious of the here and now with many businesses under pressure. The Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, has to strike a balance in deciding these issues. Clearly, there are many who see enormous opportunities in Ocean Wind where, undoubtedly Ireland has a competitive edge, but the ambition for Ireland is to get into the export market. The real issue for Ireland is to establish a basis on which we would get the potential to export in the wind sector. As I understand it - I am not speaking ex cathedra - the key is having access to other grids that would make a high proportion of wind on our grid cost effective. We need the export markets. As large amounts of wind cannot be generated for a confined grid, the extensions are required. There is a whole economic strategy in developing the wind sector and there are huge opportunities. The Minister, Deputy Rabbitte, is committed to developing a renewable energy policy which will provide a direction for that debate.
In the conflict resolution territories, there are opportunities but I am not in a position to comment on the scope of them. However, I will take note of what Senators have said.
Senator James Heffernan raised the issue of savings from the reform and whether we can achieve investments for Ireland. Clearly these issues are not linked. To create a linkage would undoubtedly be illegal. What I can say is that many of the companies we are facilitating are companies that have made significant investments in the recent past and continue to look at expansions in Ireland. It is a stand-alone good regulatory practice that we who are host to many companies from the US should seek to have an accountancy environment that is supportive of their needs. Rather than look for a quid pro quo we must recognise that our whole story is about making it easy to do business in Ireland and the more effectively we can do that, as Senator Feargal Quinn said, the more we will attract people to locate.
In regard to the new approach to audit, and whether we could have a more consistent approach, at EU level new proposals are emerging, some of which are controversial. Some would argue that the pendulum is swinging too far whereby if companies are conducting audits they cannot engage in other activities, the requirements of turnover of auditors, and the range of companies in which there would be intense audit requirements. A debate is taking place to strike a balance to ensure the flaws in audit, exposed during the financial crisis, are corrected but not to introduce unduly restrictive requirements that we would regret in time. This debate could come to fruition during our Presidency. It may be that we are in the business of banging heads together when it comes to working out those audit rules. We would be seeking to get a proportionate response. As Senator Clune said, in the financial regulatory area we have sought a balanced response to get risk based regulation proportionate to the risks provided. There is a need to do the same in the audit area. I do not understate the difficulty of getting that because there are many interests involved which have to be balanced.
I appreciate the support in the House for the Bill. It makes good sense and it is part of a wider agenda to create a good business environment. I thank Senators for their contributions and support for the measure.