Author Archives: Seán Kelly

Revolut: Banking Built For Millennials

Sean Kelly

revolut_1

Let’s face it, if you don’t have it now then what are you waiting for?
Revolut has taken Ireland and the UK by storm the last couple of years, for those of you who are unfamiliar with the mobile-based current account let me fill you in.

Revolut is just like your normal banking app on your phone, except that it actually works. It was launched in July of 2015 by its two co-founders, Vlad Yatsenko (CTO) and Nikolay Storonsky (CEO). The pair had previously spent 10 years in the investment banking industry where they experienced first-hand the astronomical fees applied to foreign exchange
transactions. Their exposure to these fees led to the light bulb moment that in 2018 was
valued at $1.7 billion.

The mobile app offers a range of features and all for free if you stay with the standard
subscription. The customer is straight away met with the simplicity and convenience that
sets it apart from its competitors as opening an account takes only a few minutes and can
be set up directly from your phone.

Once you’re set up you can manage your money through instant payment notifications and vaults that allow for the putting away and saving of money. If your friends are on Revolut you can send and request money from them instantly or even split a bill. Spending money abroad becomes a whole lot easier as you canuse your card abroad at the interbank exchange rate and take out money from ATM’s in the local currency with no withdrawal fee (up to a certain limit).
Not to mention you can buy cryptocurrencies and do some casual checking of the exchange rates (This article is not sponsored by Revolut).

Revolut has described itself as a “World Beyond Banking”. The benefits of using Revolut are endless and its slick app design and efficient processes make it
every millennials dream.

At the start of 2018 the fintech company reached a million users, 2 and a half years after it
was first established. In April of 2018 the company raised $250 million from a funding round
that was led by DST Global, a company that was early investors in Facebook and Spotify. The
funding round also included high profile venture capital firms such as Index Ventures and
Ribbit Capital. This funding round led to Revoluts’ $1.7 billion valuation which subsequently made it at the time “Europe’s Fastest Growing Unicorn”, which is by all means a highly
impressive feat.

The company now has over 3,000,000 users (200,000 of which are in Ireland) and is supported in all countries within the European Economic Area (EEA), along with Switzerland and also Australia. It recently announced its Metal subscription plan, which is essentially its Premium plan on steroids. For a cost of €8 a month users can enjoy a premium subscription where they can avail of upgrades such as a higher limit on feeless ATM withdrawals abroad, global medical insurance and discounted device insurance. The Metal subscription allows the user to earn 1% cashback on card payments, free concierge and access to airport lounges, coming in at €14 a month. The introduction of the Metal plan is testament to the constant updates that Revolut provides its customers. It is one of many examples of the company continuously progressing. Another such example is the previously mentioned airport lounges feature. This allows Metal users to get access to over 1000 airport lounges worldwide. Users simply book a pass, present it and you’re waiting for your flight in style.

Perhaps the biggest piece of news surrounding Revolut recently is the securing of a European banking licence. With this the fintech firm plans to start accepting deposits, offering overdrafts and also personal and business loans that are comparable if not better than traditional high street lenders. This really sets the way for the company to establish itself as a fully functioning bank.

​What I find most interesting and admirable about the company is its plans for the future.
With its banking licence secured, the company has focused its efforts on progressing its
commission-free stock trading along with its plan of launching its five new international
markets. CEO Nikolay Storonsky stated that they truly are on their way to becoming the
“Amazon of banking” as he intends to have 100 million people using his platform within the
next 5 years.
For those interested I’d highly recommend following Revolut’s blog where they consistently
post news and updates surrounding their business. You can keep up to date first hand with
the developments in this ever evolving fintech and also its questionable use of emojis on
social media!

Irish Corporation Tax: How It really works

Sean Kelly

We all know about Irelands’ low corporation tax. It is one of the biggest, if not the biggest factor that attracts foreign direct investment into Ireland. Being an English speaking, highly-educated island on the American side of Europe is already enough to be considered the ideal place to locate a European HQ for many multinational companies. It would seem that our low tax rate of 12.5% on the profits of a company is the icing on the cake for all the sweet toothed global firms. Let’s look at just how many of the worlds’ top companies actually are located in Ireland.

This list of companies includes old favourites such as Apple and Microsoft but also some of the more recent companies like Google and Facebook. For a country with a population of roughly 5 million people this is highly impressive and just goes to show how attractive our rate of corporation tax really is. To put our low corporation tax rate into perspective we can compare it to the rates of other countries within the EU. Ireland has the joint 3rd lowest rate in the EU with Cyprus, following only Hungary and Bulgaria (countries which are all on the far side of Europe and are less likely to attract American companies).
As I’m sure many of you are aware, we can’t simply put multinationals and Irelands’ corporation tax in the same sentence anymore without thoughts coming to mind of the Apple tax case that was ruled upon in 2016. This is the most prominent case that demonstrates that multinationals in Ireland do not necessarily pay the rate that is advertised for all companies (the statutory rate).
In 2016 it was ruled by the EU Commission that Ireland had given the multinational tech giant illegal state aid amounting to a staggering amount of €13 billion in the previous decade. In 2003 Apple paid an effective tax rate of 1% on its’ European profits recorded by its Irish subsidiaries and this had fallen to a rate of 0.005% in 2014. In the second half of last year €14.3 billion (including EU interest) was collected by Ireland from Apple and is now being held in escrow (a financial agreement where a third party holds funds for two parties involved in a transaction) until the Department of Finances’ appeal of the decision is complete.
This effective tax rate paid by Apple is not unusual for multinationals in Ireland however. It was found through a report by PwC that in 2015 in Ireland, 13 of the top 100 companies with the highest taxable income had an effective rate of less than 1% in 2015. Among this cohort, eight had an effective tax rate of 0% on qualifying income. It is important to note that this official report also recorded an estimated effective rate of 12.4%, which is obviously just below our statutory rate of 12.5%, showing little variation between what is advertised and what is paid overall in the country from all firms.
So how and why is it possible for the largest multinationals to pay such low amounts you may ask? As to the how, well this reflects the use of significant tax credits and reliefs, such as double taxation (when tax is levied by two or more jurisdictions on the same income/asset or financial transaction) relief and also research and development tax credits. Companies have been and are still using in particular tax avoidance arrangements provided by the Irish government such as “Double Irish” and “Single Malt” (10/10 for creativity on the names) which basically involve exploiting double taxation agreements Ireland has with other countries. Ireland has received much criticism on how it taxes (or lack thereof) multinationals in this way.
In the case of Apple, they were attributing billions of dollars of profits each year to three Irish subsidiaries that declared “tax residency” nowhere in the world, something which other firms hadn’t been doing. This was one step too far for the EU commission and so they made the subsequent ruling of the €13 billion payment to Ireland.
And why does Ireland allow this to happen? Simple. Having these multinationals located here is nothing but beneficial for Ireland. Our economy benefits, jobs are created and revenue is generated from the tax that is collected. Not to mention that it makes the country look great as well. If the government heavily enforced the 12.5% corporation tax rate on multinationals then they wouldn’t locate here and that to the Irish government would be more costly than taxing them the statutory rate.
So I suppose you could say the government are between a rock and a hard place, just involving billions of euros.

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