Monday, March 24, 2014


And therein lies the problem...

Saturday, January 11, 2014

no comment...

Too obvious really!

Monday, April 29, 2013

Corporation tax as an investment stimulus

The Portuguese Government is putting forward a reduction in the corporate tax rate as an urgent and necessary economic stimulus. Once again they are way off the mark.

What they are looking for is international investment, so Portugal needs to be competitive on a fiscal level, even if not when it comes to productivity. Once again, this is a public relations exercise. One big investor may bring 1,000 jobs, only to close and move on to the next cheapest country that appears, but brings a huge amount of short-term benefit to the Government.

The biggest taxpayers in Portugal are the fat cats, quoted companies, some with serious managers, mostly backed by ex-politicians and their cronies. Bringing the corporation tax rate down will principally benefit these companies, their shareholders and management.

However, the politicians are forgetting (again) the small and medium-sized companies that employ the vast majority of workers. The tax and burocratic burden on those companies is huge, with Social Security, monthly, quarterly and annual reporting requirements that continue to multiply. These companies actually pay very little corporation tax due to the difficulties of even breaking even in the current economic climate, so there is no benefit to them from reducing the tax rate.

In fact the small and medium companies pay tax regardless of their profitability. Firstly there is the legalised robbery of the Special Payment on Account that must be paid regardless of profitability and cannot be set off against the company's tax charge except if the company makes significant profits. So why call it "payment on account"? Secondly, the companies must pay tax on their motor expenses and other disguised staff costs, a charge that is doubled if the company is loss-making. This reflects the tax authorities total incapability to make sure that these benefits are taxed in the hands of the employee, which is foreseen under the tax law but never happens.

So how to stimulate the economy using corporate taxation measures? Reduce the punitive taxation on small and medium companies. Inspect companies that have the highest disguised staff costs and oblige them to declare the benefits properly, thus raising income from personal taxation. This will benefit companies across the board while only affecting the tax paid by higher earners (another politically correct move).

I'm available to join the inspection team!

Wednesday, April 24, 2013

Toxic Swaps

I hope the fallout from the toxic swap scandal will be wide-ranging and highly personal.

Managers of public sector companies, with little knowledge of management in most cases, do the rounds depending on the political flavour of the month. Thus the public transport companies are starved of any real managers, in what is already a difficult business where they are expected to balance spending public funds with providing an adequate service.

The one thing these Directors can count on is that they must make strategic contacts so as to stay on the merry-go-round.

Enter the banks. Any manager needs them. Unfortunately they are often not to be trusted, especially when they are getting squeezed from all sides because of the consequences of lending to politically correct companies that, everybody knows and always knew, have little chance of repaying the loans but have the implicit State "guarantee". And in another department somewhere, an analyst has made a bet on commodities which needs to be hedged. What better than to sell it on to unsuspection State companies?

That's not to mention the political appointees leading many of the banks. I have had the opportunity to meet many of them and I will only say that the political appointees obviously had no clue of what was going on, while those who have been there for many years and often have a personal or family stake in the business are much more on the ball.

One of the idiots was on TV today. Engº Faria de Oliveira stated that selling swaps to companies based on commodity prices or indexes that have nothing to to with their business is "a perfectly normal part of banking". Strangely, the banks are prohibited from selling such products to individuals, under european banking regulations, but companies are considered professional investors, even when their Directors are really only professional ass-kissers. That said, I have taken Caixa Geral de Depósitos to task for trying to sell complex products to my father-in-law - not that it was the branch manager's fault. He didn't have access to the documentation I pulled off the internet, in English, and handed him. Who was running the CGD at the time? You guessed it - Faria de Oliveira. But naturally, he had no knowledge of this mis-selling. A bank that big is run at a lower level. Doesn't get him off the hook though, as the Chairman and CEO, if it happened on his watch.

Another bank, one of the better run ones, once tried to sell me, as an FD, credit default swaps on various Portuguese companies, arguing that they would provide insurance against increases in interest rates. But surely, in interest rates rise, the chance of defualt also increases! They backed off once I pointed that out! Once again, the account manager didn't understand the product. Fortunately I have studied these beasts.

So the banks were pushing these products out to companies where the FD has no idea what they are because he is a political appointee with no experience of anything and needs to keep the banks happy. And he and his fellow Directors sign away the company's future. Who is to blame?

The bank is guilty of misrepresentation and will have to take a haircut.

As for the Directors, they are jointly and severally liable for negligent and ruinous mismanagement. So let them pick up the rest of the losses, personally. Maybe that would signal to the rest of the political community that incompetence cannot be tolerated, nor people who are incapable of admitting that they don't know what they are doing. Get rid of these guys and make room for people who do understand business and how to run a company. On the other hand, as the shareholder who would have to sue these individuals is the State, I can't see that hapenning.

So the taxpayer will pick up the bill, again...

Sunday, April 07, 2013

Unconstitutional Government

In Portugal, the successive governments are numbered since the date of the foundation of the third republic in 1976. The current government is "Constitutional Government XIX".

Last Friday the Constitutional Court overturned a number of clauses in the 2013 budget on the ground that they infringe the constitution. Fortunately the Government and the President (both PSD) have concluded that they must battle on and not call elections, which would have caused irreparable damage to the country and its support from the international financial backers.

What I find strange is the Government's reaction to the Court's decision. They accuse it of not taking the financial crisis into account when reaching their decision! Surely that is the whole point of having a Constitutional Court: to uphold the constitution whatever the circumstances? Even the judges appointed by the current Government voted against the clauses that were overturned.

So with a record of two partial failures to comply with the constitution in two consecutive budgets, I propose that this should be renamed "Unconstitutional Government XIX".

Now stop playing the offended spouse and get on with governing!

Thursday, April 04, 2013

No Confidence in Portuguese Politicians

Yesterday the opposition Socialist party's motion of no confidence in the right wing PSD/CDS government was predictably voted down by the majority coalition but not before causing a run on the stock market.

The only thing this fiasco proved was that, once again, the politicians are idiots who are more interested in posturing and pandering to the mass media than in trying to run the country. And the biggest idiot on the stage at the moment is José António Seguro (whose surname ironically translates as safe or insurance), the leader of the opposition. He is a caretaker leader for a period when the Socialist party had no hope of even influencing policy but now puts himself forward as candidate for Prime Minister! That's more frightening to me than the terms of the Troika loan.

He was steamrolled into the vote of no confidence by the media, while realising that he has to play to the creditors who are withholding stage payments on the international funding in view of the political turmoil and disastrous financial performance. And I won't even start on assessing their performance because I am not an expert in macroeconomics, though it seems to me obvious that their cuts could have been expected to cause the sharp recession and severe reduction in tax receipts that has been seen in the first two months of the year.

So here we are, suffering from the excesses of the past, stuck with a bunch of idiots as leaders whose long-term plan is to get away with a nice job or pension at the end of their second term but with nobody better to replace them that I can see. That's politics I suppose...

But one deficit reduction proposal could come out of this: Those parties or members of parliament who are found to be wasting time rather than producing something constructive should have their pay docked! Or would the process of proposing and voting that through also be considered a waste of time?

Thursday, March 14, 2013

A Step Backwards to Move Ahead?

The Portuguese media abounds with pundits and analysts on all things Catholic and none of them were betting on the Argentine cardinal for the top spot. So its better not to chew over in detail all their arguments and commentaries - I am after all an unbeliever.

But the idea that they have now appointed the man who should have been chosen 6 years ago rather than D. Ratzinger is interesting. It's a shame he's now older and inevitably less energetic than he would have been. So will Pope Francis make any difference or is he just another compromise candidate to pander to the establishment? Only time will tell...

Monday, February 25, 2013

General Overkill

No that's not the name of a fictional gaming character. Saturday saw a meeting of high-ranking officers in Lisbon to discuss the future of the armed forces under the economic austerity programme. Nothing unusual about that in these troubled times. Until we discover that 50 generals attended! How can a peripheral country like Portugal justify having 50 generals?

I have doubts about the usefulness of having an army at all and the navy and air force should be reinvented to deal primarily with search and rescue and patrolling the coastline against drug and other smugglers. But that's not the point.

The armed forces are a significant burden on the country's finances and have actually been little affected by the cuts so far. It has always been a job for life (which admittedly has served my adopted family well). And I won't even go into the waste of money and resources that is rife among staff which consider themselves badly paid nor into the inoperative machines and equipment bought by successive governments with no proper consideration of the ongoing operating and maintenance costs.

Of course, those at the meeting may be serving and retired generals as we can't really stop them getting involved after retirement on their comfortable pensions. It later turned out that they were generals and admirals. I hope they resolved to help the belt-tightening exercise, but somehow I think not.

Thursday, December 06, 2012

Aviation Herald under legal threat

I have been a fan of Aviation Herald for some time. It provides informed in-depth information on aviation incidents worldwide and is considered an authoritative reference for news services.

The site is now under threat due to negative comments made by its readers about a single airline, which everyone is presuming to be Ryanair, since the legal threat follows this report:

"Incident: Ryanair B738 at Memmingen on Sep 23rd 2012, descended below minimum safe height
By Simon Hradecky, created Monday, Dec 3rd 2012 17:52Z, last updated Wednesday, Dec 5th 2012 12:33Z 
A Ryanair Boeing 737-800, registration EI-DAC performing flight FR-3214 from Manchester,EN (UK) to Memmingen (Germany) with 135 passengers and 6 crew, was on a visual approach to Memmingen's runway 24 turning onto but overshooting the extended runway centerline at high vertical descent rate. While attempting to align on the extended runway centerline, the aircraft still descending at high rate of descent, the aircraft descended below required minimum height of 1000 feet AGL about 4nm ahead of the runway threshold. Following an EGPWS warning "CAUTION TERRAIN!" the crew levelled off reaching a minimum height of 450 feet AGL and began to climb the aircraft, climbing through 460 feet AGL the crew received a "TERRAIN! TERRAIN! PULL UP! PULL UP!" EGPWS alert and initiated a go-around. The aircraft landed safely on their second approach.

In their monthly bulletin Germany's BFU rated the occurrence a serious incident and opened an investigation reporting the minimum safety height was 1000 feet AGL however the aircraft descended to 450 feet AGL before beginning to climb again, in response to the "Terrain! Pull Up!" warning the crew initiated a go-around, all of the sequence happening within seconds. The BFU used information off the Quick Access Recorder, radar data by DFS (German Air Traffic Control provider) and crew testimony for their report.

Ryanair reported on Dec 4th 2012, that the crew did not receive a "Caution Terrain" message, never levelled off but initiated the go-around prior to the "Terrain! Pull up!" EGPWS warning. There is no minimum height applicable to this type of approach. The incident was reported to the relevant Authorities less than 12 hours after the event, all data have been provided. In a subsequent phone call on Dec 4th 2012 Ryanair's chief pilot stated that the crew initiated the go-around prior to the "Caution Terrain" (confirming the Caution Terrain message disputed by Ryanair's press officer in e-mail before) and "Terrain! Pull Up!" message, that followed the Caution Terrain message almost instantly, and voiced concern that the sequence of events as portrayed by the BFU report create the impression the crew ignored warnings, something which is not at all tolerated within the company, rather than the crew preemptying the warnings.

Later Dec 4th Ryanair issued an official press release reading: "Ryanair flight FR3214 (Manchester - Memmingen) on 23 Sept last was on its final approach to the runway in Memmingen when they encountered unexpectedly high tail-winds. The crew decided to initiate a go-around procedure in-line with Ryanair operating policy. After they had already commenced the go-around the aircraft warning systems sounded and the crew completed their go-around, landing normally a short time later. This incident was reported to the IAA on 24 Sept, and is the subject of an ongoing investigation."

On Dec 5th Ryanair's press office sent an e-mail and phoned The Aviation Herald to the effect that they never disputed the "CAUTION TERRAIN" message actually claiming the first e-mail sent to The Aviation Herald on Dec 4th had been drafted by Ryanair's Chief Pilot and signed off at the top ranks of the airline. This e-mail demanded apologies by The Aviation Herald as well as removal of the story altogether. At the end of that conversation on Dec 5th it was decided upon request by Stephen McNamara that the initial e-mail should be published in full:

Dear Simon

I refer to your summary analysis of the BFU bulletin published in Aviation Herald today . The AH analysis contains a number of inaccurate claims relating to the incident that occurred on 23rd Sept at FFM .

1. There was no required 'minimum height' of 1000' applicable to this approach

2. The crew did not receive a 'CAUTION TERRAIN' warning before the go around was commenced .

3. The crew did not level off at any stage during the approach.

4. The crew initiated the Go Around before the 'Terrain Terrain PULL UP' warning and not after the warning, as claimed in the bulletin.

Ryanair reported this incident to the Regulatory Authorities less than 12 hours after a report was filed by the crew . We have provided the BFU (via AAIU ) with all of the data for this flight . We ask that the article be removed from the Aviation Herald website and an apology be issued by the AH for implying that the crew did anything wrong when recovering from this unstable approach incident.

This article is being picked up internationally and is inaccurate.

Please give this your urgent attention and call me to discuss.

Stephen McNamara
Head of Communications
Ryanair Head Office
Dublin Airport"

This is, in my opinion, a case of unacceptable strong-arm tactics by an unscrupulous business against a highly-professional organisation.

It is well known that Ryanair and its CEO go out of their way to get any sort of publicity, after all "there is no such thing as bad publicity". So why are they surprised that so many people seem to hate them? Not forgetting that the internet is the ideal medium for spreading negative sentiment about any product or service.

Up to what point can the website be held responsible for its readers' comments and opinions? Surely it is not responsible for censoring comments made by third parties!

I hope that this matter gets the publicity it deserves and Ryanair is inundated with complaints. I have never flown Ryanair, never will.

Thursday, November 29, 2012

Business Support

Over the last couple of years I have been involved in a number of companies, from diversified economic groups with hundreds of employees through quoted start-ups to owner-operated small businesses. The accounting function in these companies can be classified in one of three ways:

  • business support function, providing timely, relevant information to managers to help them run the business;
  • irrelevant back-office legal necessity with no management reporting;
  • obstacle to business development, distracting management from strategic matters due to mis-handling and misinterpretation of information.
Unfortunately, none of the companies could boast systems that produced business support information, at least on a timely basis. Most companies fall into the second category. As for the third category, I am quite embarrassed as an accountant that accounting issues can be so complex and devoid of business relevance that this business support function can end up distracting management from strategic issues.

More worrying still, none of the companies had any cash-flow information built into their financial reporting. Now some years into the recession, companies still have not grasped that cash is king.

Who is to blame for this accounting disfunction? In the first place, management, many of whom have no formal training and have to rely on their accounting function.

In the second place, the finance directors and accountants who often see themselves as a necessary evil rather than a function that can add value. Too often I hear them say, "Nobody asked us for any management information." To me, such a statement is grounds for dismissal. Even when the accounting is outsourced, the service provider should send management information, even if the client does not ask for it. That's what I do for my clients - no complaints yet...