Irish Finance Minister Lauds Success of Dublin IFSC

Tax-news.com

29 March 2000

Speech by Mr. Charlie Mc Creevy T.D. the Minister for Finance,
at the launch of the FINANCE DUBLIN IFSC YEARBOOK 2000
on 27 March 2000 at O ' Reilly Hall, Belfield, Dublin

Charlie Mc Creevy TD, Minister for Finance said "The IFSC story is one of the best success stories of how Ireland, have climbed out of the doldrums of economic failure by opening up our minds and our doors to a new way of doing business. I don't think anyone would challenge me when I say that Finance Dublin, and its parent Finance before it, have been strong, progressive voices over the last decade in promoting a greater understanding of the IFSC as a great place to do business".

DEVELOPING INTERNATIONAL FINANCIAL SERVICES

The Minister stated "Since 1987, the promotion of the IFSC has received crucial political backing and public service support. My predecessors as Minister for Finance, including Bertie Ahern of course, and previous Taoisigh, have each given the political impetus needed to start and continue the growth of the IFSC.

"Now the IFSC is changing. The ring fence around the IFSC is going, and we are well on the way to the 12½ per cent corporation tax rate." What we have from now on is international financial services from Ireland. The type of political and public service backing needed from now on will also adjust to meet this change.

We are no longer talking about nurturing a special zone. It is now about fostering an integral part of the economy, and a particularly important part, the internationally traded services sector.

As I see it, the task ahead is to build an economy where a key comparative advantage is sustained in international financial services. This is as challenging a task, in my view, as building the IFSC has been. But it is one equally, or even more, worth striving for, because all the indications are that it is a sector where we can compete and win, and where there are great growth prospects in the EU and beyond.

There are many areas of detailed work to be addressed, quite urgently, over the coming months and years to make sure that we can both foster the international sector and maintain the integrity of the domestic tax and regulatory system. We want to build a tax and regulatory regime for financial services that is robust, competitive and market-aware. A tax system that is, in no way, precariously positioned in relation to international norms - one that operates with full regard to international obligations while fostering competitiveness at home. We need a regulatory system that is well-resourced, well-versed in leading market practices, responsible and responsive.

SINGLE REGULATOR

I know that you are keenly awaiting a decision from the Government on the issue of the Single Regulator for financial services. The Government is very mindful of the need to safeguard the international financial services sector in the designing of our regulatory system. This is not a 'turf war' issue.

We are fully aware of the importance of getting it right first time, and quickly implementing any changes, so that the public service and industry can get on with developmental work. This has to be the focus for all of us interested in building the financial services of the future.

We have to strike the right balance between facilitating producers of financial services - particularly international services - and promoting the interests of consumers.

We are determined that the IFSC's hard-won reputation as a substantial, well-regulated financial services hub will continue to be built on over the coming years. But what we mean from now on is not just the IFSC's reputation, but Ireland's as a whole.

DIRT

That is why it is important that failures of the past in the domestic financial services area, especially those in relation to Deposit Interest Retention Tax, should be addressed quickly and fairly. I must again say that the standards the public are entitled to expect were not adhered to in many financial institutions, and that was very disappointing. I told my party recently that due process of law must be central in the resolution of the issue. I strongly believe that there is no place for a vindictive attitude to a key sector of the economy, as banks are, no matter what the immediate hue and cry at any time might suggest. However, we must move quickly to solve these issues and move on.

IFSC BANKS AND REVENUE

That's why, as regards IFSC banks and DIRT tax audits, I was very pleased to see that a joint statement was issued by the FSIA and the Revenue Commissioners after their recent meeting.
The Revenue Commissioners have the Government's full support in exercising their functions with the highest standards of diligence, including the long-standing principle of care and management which guides their work.

Without Revenue support over the years, the IFSC would not have developed as it has done. We should all remember that. This is true also of the Central Bank, the IDA and civil servants in key government departments. In regard to international financial services, I think we should look to how much we do work together, and how much we have already achieved together. We have a strong relationship of trust and this is our greatest asset going forward.

GROWTH IN IFSC

We start the beginning of the next phase of the IFSC from a tremendously strong position. Today IFSC companies employ more than 8,500 people either directly, or in associated IFSC back office projects.

Funds under management at the IFSC are now in the region of 126 billion Euro. This represents an increase of 77% on 1998.

International bank assets grew by 36 per cent to 135 billion Euro and there continues to be interest in establishing new international banks here.

International life assurance is growing at a tremendous pace too - 28 life assurance companies operate from the IFSC, which compared with just two companies writing foreign risk business in 1992. Since then, foreign risk premiums grew twenty-six fold to £1.4 billion in 1998.

I believe 1999 has been a very strong year too for IFSC life companies. These statistics highlight a great success which is a tribute to all the people working in and for the IFSC and in the public sector.
As I'm sure you will agree, we can never afford to be complacent, or to say that so much new business is enough. The pace of change in new products and financial services means that standing still is simply not an option.

INITIATIVE AT GOVERNMENT LEVEL

The Government is committed to continuing to work with industry in developing international financial services. Recently, a one-year progress report was issued on the Taoiseach's strategy for the IFSC. This strategy and the process of continual monitoring is designed to keep the momentum of progress going.

Our job in Government is, first and foremost, to get things right at the level of the whole economy. One part of creating a competitive economy for the future will be facilitating e-commerce. The EU Lisbon summit I attended last week put this at the top of the agenda. Here in Ireland, we are fast-tracking an E-Commerce Bill this year. The crossover between e-commerce and financial regulation is clear to us all. And just as in the 1990s we could develop an approach to international financial services in Europe which allowed us to build the IFSC, so we can, if we put our minds to it, develop competitive advantage in e-commerce and electronic financial services. I am sure that many of the speakers at the Conference will elaborate on this theme and I look forward keenly to hear about all their contributions.

And in relation to infrastructure, I want to welcome and encourage the interest of IFSC banks in making Public Private Partnerships a key part of delivering the infrastructure we need.

FINANCE ACT

I am sure you'll all be as pleased as I am to know that this year's Finance Act was signed into law by the President on Thursday last. Who would have predicted last December that its delivery would have passed almost unnoticed in the media? I think a lot of people will notice in April when they see their new pay slips.

The Finance Act made significant progress extending international financial services out from the IFSC and applying common rules for the taxation of funds and life assurance for the whole jurisdiction of Ireland. I know that a lot of work has been put into the changeover arrangements by industry representatives and by officials in my department, working together in the best traditions of the IFSC. I'd like to take this opportunity to thank all involved for their hard work and dedication.

The Finance Act also amends and simplifies the system of dividend withholding tax, in a response to industry views aired over the last year.

This is the way we will work going forward - focused on the opportunities, dealing with the real issues effectively, maintaining the integrity of our system of tax, regulation and law.

The Finance Dublin IFSC Yearbook 2000 can be ordered from the Finance Dublin Website: http://www.findub.com/index.html

Related Article:
McCreevey backs Revenue stand on IFSC tax regime - Irish Times
http://www.ireland.com/newspaper/finance/2000/0328/fin8.htm

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