Comment: The Minister for Finance's decision to exempt the disposal of subsidiary companies from capital gains tax and to expand the scope of our double taxation relief provisions for dividend income paid to parent companies are progressive and positive initiatives, according to Fergus Murphy.
Taken in combination with the other key influences such as education, people skills, legal framework and regulatory environment, these measures will greatly enhance Ireland as an attractive location for company headquarters and holding companies, not least in the financial services sector. The wider implications for the economy are very positive in terms of employment creation and value added.
The Federation of International Banks in Ireland (which is affiliated to the Irish Bankers' Federation) is concerned with maintaining and building on Ireland's attractiveness as a location for international banking services. Among the priorities we identified for 2004 is to promote the introduction of holding company or headquarter structures in our tax legislation. This is a direct and necessary response to changes in other jurisdictions - Germany, the Netherlands, Sweden, Denmark and the UK in particular - which have had the effect of placing Ireland at a competitive disadvantage. It is essential that we continue to successfully compete internationally for such business. Why? Because it has the potential to further generate high-quality employment and to foster wider economic development. While some may try to characterise international company headquarters as 'brass plate' operations, the reality is that such operations are anything but; rather, they actually drive the value chain decisions in any enterprise. Ireland will be a major beneficiary of this process in terms of economic and employment growth.
As stated, the holding company/headquarter issue is just one of FIBI's priorities in taking Ireland onto the next level in terms of attracting international financial services. We cannot afford to stand still, despite the very significant success achieved to date through targeted tax legislation, pro-active regulation, a skilled talent pool, world-class legal and accounting professionals and a constructive public private partnership approach. The evidence of this success is clearly tangible in the following.
Some 13,000 people were directly employed in international financial services here in 2003, based on a pattern of consistent employment growth over the years.
Ø Corporation tax receipts in excess of €700 million accrued to the exchequer in 2002.
Ø The assets of IFSC banks stood at €212.3 billion in 2003 (June) - so much so that, when total assets of all credit institutions here are taken as a percentage of GDP, Ireland ranks second highest of the 15 EU Member States after Luxembourg. This clearly illustrates the importance of the banking sector overall to the Irish economy.
Ireland has attracted the world's top names in international financial services. Some 1,200 projects - involving subsidiaries of Irish and foreign banking institutions - offer global services in banking, funds and treasury management, dealing and brokerage, financing activities, securitisation, insurance and reinsurance.
If one were to try to identify the single key factor that defines the success behind these statistics, it would be "innovation". It was innovation in strategic and political thinking that gave rise, in the first instance, to the whole concept of Ireland as a location for global financial services; and that has contributed to the revitalisation and transformation of not only a major part of our capital city but a major sector within the national economy. It is innovation in public-private partnership that has developed an environment sufficiently conducive to attract many of the world's leading service providers. It is innovation in product/service development which has given Ireland a footprint in the provision of international banking services; including asset financing and leasing, international lending and loan syndication, mutual funds management and administration, commercial paper issuance, bank treasury operations, management of client treasury functions, securitisation, custodial and administrative services to the mutual funds industry.
Notwithstanding the success achieved to date, we cannot afford to rest on our laurels. All the relevant parties - financial institutions, Government, regulators, policy makers - must continue to take an innovative approach, individually and collectively, in the ongoing promotion of Ireland as a location for international financial services. FIBI and the Irish Bankers' Federation fully recognise the important role we have to play in this process - not least through actively encouraging more financial institutions and service providers to establish operations here.
In conclusion, innovation has been the hallmark of success in developing the IFSC, and Ireland generally, as a leading centre in the provision of global financial services. Whether in our strategic planning, legislation, policy making, product/service development or wherever, innovation must continue to be the key to securing future success.
Fergus Murphy (Managing Director, Rabobank) is Chairman of the Federation of International Banks in Ireland (FIBI), the representative body for international banks in Ireland. FIBI is affiliated to the Irish Bankers' Federation.
