Corporate investment proposal rejected

The Department of Finance has rejected a proposal from the funds sector in the Financial Services Centre to create a new corporate funds structure in Ireland, warning it could damage the country’s tax reputation and be frowned upon by other EU countries.

The information — from minutes of meetings of the IFSC Clearing House Group representing the Government, state agencies and the financial services industry — illustrates the need for greater transparency, according to Labour MEP Nessa Childers who requested the information.

A part of the minutes of a meeting held in the Department of the Taoiseach last year dealt with submissions from the funds industry that resulted in a significant package of measures to support the IFS sector that was part of last year’s Finance Bill.

It noted that virtually all of the issues contained in the funds industry pre-budget submission were being progressed: “There are between 15-20 individual measures under consideration. The aim of a number of these measures is to simplify the tax treatment applying to complex financial transactions in order to make it easier to do business.”

The note said the tax policy unit of the Department of Finance had been working closely with the different industry subgroups in the run-up to the Finance Bill, and had three meetings afterwards.

The department rejected a proposal from the funds industry for the Government to introduce a bespoke tax regime for a new type of investment vehicle, an alternative investment company.

The department said it had to consider the broader implications of individual proposals in terms of their potential impact on Ireland’s reputation: “It was the department’s view that the introduction of such a vehicle could be viewed negatively by our Treaty partners as overly aggressive and as a result, the proposal was not being considered for the Finance Bill.”

The note said the department understood the industry’s disappointment but highlighted that virtually all the other issues it proposed were being developed.

Aoife Ní Lochlainn, policy analyst with the independent economics think tanks TASK, said: “These minutes starkly illustrate the high-level access and influence that the financial sector enjoys. There is a risk that the forthcoming Finance Bill could weaken support for a deal on Ireland’s legacy banking debt at EU-level and endanger Ireland’s international reputation if it facilitates companies or funds to undermine the tax bases of our European partners.”

Last year, under pressure from Ms Childers and others, Taoiseach Enda Kenny agreed to publish the minutes of the Clearing House Group from Mar 2011 to Sept 2012 and committed to publishing the minutes of subsequent meetings online three months. Ms Childers described the Clearing House Group as a lobby for the financial services industry, which gives them a direct line to Government and important officials in the Department of the Taoiseach.

It has sub-groups focusing on hedge funds, insurance, banking and treasury sectors with monthly meetings of each in Government Buildings. Ms Childers said that as the groups influence policy that affects the lives of all sections of Irish society, other sectors should be represented also.

“It is of course essential that there is close co-operation between the Government and the IFSC in developing such an important sector, the IFSC provides thousands of jobs and much needed tax revenue. However, we know from previous experience that policy on such critical sectors of the economy must be openly and transparently debated, with balanced input,” she said.