By his own admission, Seamus Hand was somewhat surprised when it emerged this month that Ireland was one of just nine countries that did not sign a major agreement at the OECD to reform the global corporate tax regime. After all, the nine countries (since reduced to eight) include a number of jurisdictions regarded across the international community as tax havens such as Barbados and Saint Vincent & the Grenadines.

However, the more Hand, the managing partner of professional services giant KPMG, thought about it, the more he became convinced that the Minister for Finance Paschal Donohoe had actually made the correct call. After all, he says the 12.5 per cent rate was a key part of Irish industrial policy, and that there was also a lack of clarity about many of the proposals being tabled by the OECD.

“The Minister for Finance has also made the point around the whole question of minimum tax rates,” Hand told The Currency in this week’s podcast.

“The changes are about trying to ensure there’s a level playing field. And if there’s going to be a level playing field, it needs to be level across all different aspects. And there’s no doubt that big countries have lots of advantages over smaller countries like Ireland. Corporate tax rates are just one of the different aspects of that. Therefore, just looking at it in isolation is somewhat unfair and unreasonable.”

Hand, who took over as managing partner of KPMG two years ago, said the debate around global tax reform needed to consider the various benefits that are available to larger countries as well as the politics of getting international agreement.

“I think there’s still a huge amount of uncertainty around exactly what’s going to happen on these proposals. And while Joe Biden’s Treasury Secretary Janet Yellen is coming out supporting them, it’s very challenging to bring through any changes around this in the US,” he said.

“I think the minister’s position is very much that we need to see what the proposals are actually going to be. I think the minister has shown bravery and taken a position that is very much consistent with probably the most significant and most important policy that we’ve had in this country from a foreign investment perspective and that is the stability and certainty in our tax regime. And the position he’s taken is entirely consistent with that. And I think it’s a very important and probably the most important thing that we hear from foreign investors.”

A year has passed since I last interviewed Seamus Hand. At the time, the pandemic had shuttered the economy and there was an uneasy uncertainty about the outlook for the future. When we spoke then, Hand talked about the need for liquidity and for tailored government interventions.

Twelve months later, portions of the economy remain in lockdown but, as he talks to clients and other business leaders, Hand can sense the optimism. Deal flow is booming, and corporate valuations are surging.

“I think the big change that I have seen is business leaders and governments have a lot better understanding of what the impact of the pandemic has been, and a better understanding for what they feel is going to happen in the future – and for how we will hopefully navigate our way out of this crisis over the short term. And I think that certainty is what is most different, and it has brought a much greater level of optimism,” he said.

“I think we can see that there’s a lot of optimism out there because the economy is clearly starting to open and will do so even quicker as the vaccines get rolled out. And I think consumers are starting to get more optimistic. We see it in the retail figures and in spending patterns. There is the most significant amount of savings there’s ever been in the Irish banks. So, there’s a certainty fuel there to enable a strong recovery.

“A massive amount of liquidity has been pumped into our economy – both locally and globally. And pretty much every economic commentator, both in Ireland and internationally, is predicting a very strong recovery in terms of GDP. And I think all of that is coming together in the sentiment. It is still slightly surreal because we are still in a pandemic with most people working from home and with a lot of businesses still not quite as open as we’d like. But notwithstanding that, the future looks extremely bright.”

The optimism is reflected in deals. Hand’s corporate finance team have advised on a string of major transactions in recent months, and he says the pipeline of future transactions is equally strong. “It costs a lot of money to hold on to capital-efficient deploys. And in order to negate that, people proceeded with the deals that were in the pipeline, and indeed instigated new ones,” he said.

“Certainly, when we talk about the type of deals that have happened, it’s typically financial investors who were comfortable being able to do deals in a largely remote or virtual way. Other types of investors who tend to operate more on the basis of buying into a management team, and you’re integrating businesses in a different way, there’s probably been less of those sorts of deals. We still have a really strong pipeline of activity in our deal advisory business, and we’ll be pretty confident about the rest of this year.”

“We haven’t had the same influx of talent”

While Hand is bullish about the future, he is concerned about the issue of recruitment. He has seen the difficulties in attracting the right talent in his own profession, and it is something that he has also heard from clients and other companies.

“We are very optimistic about our own business over the next year or two. And we feel that the biggest constraint on our business will be being able to access the right number and type of resource. And we hear that from clients in lots of sectors. I think there’s a number of different factors of play. One is certainly that the government supports that are better there – and I think are rightly there – are not encouraging some people back to work as quickly as might have happened. And therefore, we need to manage the impact on people. And we also need to facilitate them getting back to work through a transition,” he said.

“The other bit that I think is influencing it is the lack of travel. And this isn’t just specific to Ireland, but we benefit significantly from people of all different types of backgrounds and skills and capabilities coming to work in Ireland, particularly in some of our very vibrant sectors like technology and pharma. And with borders significantly closed over the last while, we haven’t had the same influx of talent that has enabled businesses to access those resources. So I do think governments have a role to play on both sides of that to facilitate people getting back to work, but also to ensure that Ireland remains an attractive place, and is reopened to enable people to come here and work.”

Seamus Hand on the future of aviation

“I think it has been quite amazing at how many of those companies right across the aviation sector have actually managed to survive. I think what was really important was they had strong balance sheets. I think they’ve done a really fantastic job of managing the balance sheet risk. Some of that has been through government support for airlines, and other ways to ensure that they have sufficient balance sheet strength to get them through this. I believe, personally, but also from talking to CEOs of airlines, that there’s going to be a very strong and quick rebound in the business. I think we will see it first of all in the short-haul business. Long haul might take a bit longer.

“The crisis has also facilitated them restructuring their costs and undertaking some other transformations around ESG and bringing in more efficient aircraft and things like that. While I’m not suggesting for a second that that would have been welcomed, I think they began taking the opportunity to learn some very positive lessons.

“And then in the broader aviation community, like those aircraft finance companies, I think they’ve weathered the storm very, very well, partially because of that liquidity and balance sheet strength.”

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