Tax changes which could radically curtail the operations of non-resident companies registered in Ireland are unlikely to be in place before the end of the year. Some 40,000 are believed to be in existence and a percentage are being used to hide the proceeds of crime.
Draft legislative changes which would bring the companies into the tax net are being considered by a working group established by the Government earlier this year. The group was set up on foot of growing concerns about the abuse of some companies by dubious investors.
Other changes being considered include new legislative requirements whereby companies registering here must have a director who is resident in Ireland or another EU state and tougher measures to enforce compliance with company law. A Central Bank proposal to bring company formation agents within the money laundering provisions of the Criminal Justice Act 1994, is also being examined. It would impose a "know-your-client" requirement on formation agents and accountancy firms, obliging them to declare the identity of the company's beneficial owner.
The draft legislation is based on the working group's own recommendations and was referred back to it for further consideration.
The nominee directors of many non-resident companies registered here are based on the small Channel Island of Sark, residents of which derive substantial fee income from providing such service. But according to Mr James Brannam, chairman of the Sark Association of Corporate Administrators, if the proposals were adopted, most of the estimated 40,000 non-resident companies would close down "overnight".
The Sark directors have become increasingly active in Irish companies over the past 10 years after Britain brought all companies registered in its jurisdiction into the tax net. Since then, Ireland has become a favourite European tax haven for thousands of foreign investors and is now the only EU state to allow foreign-owned companies to set up without incurring any tax liability.
The so-called "Sark Lark", where the Channel Islanders become nominee directors, enables the true identity of the beneficial owners of the companies involved to be concealed.
Mr Brannam, who is a director of up to 100 Irish companies at any one time, suggests that any tightening of Irish registration requirements would prompt most of these companies to move to other, more relaxed jurisdictions.
A number of non-resident companies are used legitimately by Ireland's multinational sector and the new legislation is not expected to alter the tax advantages they enjoy.
