Ryanair 2016 Annual Report Download - page 62

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Irish government has repeatedly publicly stated that it will not increase corporation tax rates, there can be no assurance
that such an increase in corporation tax rates will not occur.
In the event that the Irish government increases corporation tax rates or changes the basis of calculation of
corporation tax from the present basis, any such changes would result in the Company paying higher corporate taxes and
would have an adverse impact on our cash flows, financial position and results of operations.
Change in EU Regulations in Relation to Employers and Employee Social Insurance Could Increase Costs. The
European Parliament passed legislation governing the payment of employee and employer social insurance costs in May
2012. The legislation was introduced in late June 2012. The legislation governs the country in which employees and
employers must pay social insurance costs. Prior to June 2012, Ryanair paid employee and employer social insurance in
the country under whose laws the employee’s contract of employment is governed, which is either the U.K. or Ireland.
Under the terms of this new legislation, employees and employers must pay social insurance in the country where the
employee is based. The legislation includes grandfathering rights which means that existing employees (i.e. those
employed prior to the introduction of the new legislation in June 2012) should be exempt from the effects of this legislation
for a period of 10 years up until 2022. However, both new and existing employees who transfer from their present base
location to a new base in another EU country may be impacted by the new rules in relation to employee and employer
contributions. Each country within the EU has different rules and rates in relation to the calculation of employee and
employer social insurance contributions. Ryanair estimates that the change in legislation will have an adverse impact over
time in the majority of jurisdictions in which Ryanair currently operates from.
Ryanair is Subject to Tax Audits. The Company operates in many jurisdictions and is, from time to time, subject
to tax audits, which by their nature are often complex and can require several years to conclude. While the Company is of
the view that it is tax compliant in the various jurisdictions in which it operates, there can be no guarantee, particularly in
the current economic environment, that it will not receive tax assessments following the conclusion of the tax audits. If
assessed, the Company will robustly defend its position. In the event that the Company is unsuccessful in defending its
position, it is possible that the effective tax rate, employment and other costs of the Company could materially increase.
See “—The Irish Corporation Tax Rate Could Rise” above.
Risks Associated with the euro. The Company is headquartered in Ireland and its reporting currency is the euro.
As a result of the ongoing uncertainty arising from the Eurozone debt crisis, in 2012 there was widespread speculation
regarding the future of the Eurozone, including with regard to Ireland. To date, there have been no exits from the Eurozone.
Although the economic environment in Ireland has considerably improved, there is still a risk of contagion spreading to
the weaker Eurozone members. Greece in particular is a potential risk as negotiations around the final restructuring of their
existing debt program continue. As many international banks no longer have material exposure to Greek bonds or Greek
banks, the risk of contagion in the banking system as a result of Greek default is now considered to be low but should not
be totally discounted. In addition, following a Referendum on June 23, 2016, a majority of the U.K. population voted to
leave the EU. The immediate impact of the vote was that the U.K. pound sterling weakened significantly against the euro.
Ryanair predominantly operates to/from countries within the Eurozone and has significant operational and financial
exposures to the Eurozone that could result in a reduction in the operating performance of Ryanair or the devaluation of
certain assets. Ryanair has taken certain risk management measures to minimize any disruptions; however these risk
management measures may be insufficient.
The Company has cash and aircraft assets and debt liabilities that are denominated in euro on its balance sheet.
In addition, the positive/negative mark-to-market value of derivative-based transactions are recorded in euro as either
assets or liabilities on the Company’s balance sheet. Uncertainty regarding the future of the Eurozone could have a
materially adverse effect on the value of these assets and liabilities. In addition to the assets and liabilities on Ryanair’s
balance sheet, the Company has a number of cross currency risks as a result of the jurisdictions of the operating business
including non-euro revenues, fuel costs, certain maintenance costs and insurance costs. A weakening in the value of the
euro primarily against U.K. pound sterling and U.S. dollar, but also against other non-Eurozone European currencies and
Moroccan Dirhams, could negatively impact the operating results of the Company.
Recession, austerity and uncertainty in connection with the euro could also mean that Ryanair is unable to grow.
The recent European recession, austerity measures still in effect in several European countries and social and political