Bertie Ahern
Question:3 Mr. B. Ahern asked the Taoiseach the progress, if any, that has been made in the deliberations of the long-term review group on the IFSC. [2964/96]
Ceisteanna—Questions. Oral Answers. - IFSC Long-Term Review Group.
Last year I established two small high level groups to advise me on the future development and expansion of the IFSC. The group to which the Deputy refers in his question, the Long-Term Review Group, consists of senior figures in the Department of Finance, IDA Ireland, the National Treasury Management Agency and my own Department under my chairmanship. This group is focusing on the structures, legislative and regulatory, needed to maintain a pro-business environment and the centre's competitive position. It is also monitoring developments within the European Union, especially at Commission level, in the form of draft directives and other proposals. The group has met three times and is due to meet again on 7 March. It is intended that the group will consider the findings of the IFSC International Advisory Group, which I established last year.
The International Advisory Group, which was established primarily to obtain the benefit of objective overseas expertise in the international financial services area, includes a small number of individuals from leading overseas financial institutions. I have asked this group to advise me on realisable targets for the IFSC in terms of the volume of funds under management and on levels of activity in the banking, asset finance, treasury, insurance and life assurance areas that might be achieved within a specified time frame to assist in setting long-term targets for the next stage of the IFSC development. It has also been asked to recommend (a) any administrative, regulatory or legislative changes or (b) any new products or services or (c) any other measures which might improve the competitive position of Dublin vis-à-vis the more traditional financial centres, and to make any other recommendations it considers will enhance the development potential of the IFSC. It is intended that the work of this international group will be completed within the next couple of months with the submission to the Taoiseach of a report based on the above terms of reference.I feel this industry input is essential since, while the public sector will create the right conditions for growth, it is of course those in the industry itself who create success through product development, quality service, high standards and, of course, hard work. The group has met twice and its next meeting is scheduled for 29 February in Boston.
I thank the Minister of State for his detailed reply. I could not help thinking after the last question, when the Taoiseach discounted international reports, that the Minister of State has gone outside to get an international body to try to assist him. However, it is still a good idea.
The main issue, as the Minister of State will be aware whether it is an international or local body, is that the financial world wants the Minister to make a decision as to whether the Government will seek an extension of the 10 per cent tax rate which is due to run out in 2004. That is the key issue. Is the Minister of State in a position to give the House a reply?
I am not in a position to give a definitive reply at present. Obviously it is one of the considerations which has made the IFSC a great success. The IFSC has passed its critical mass stage and is now internationally accepted as a major player. It will be my job to build on that success. I recognise that the tax rate is one part of the formula which attracted people to the centre. The other parts of that formula include a good communications system, access to Government, a pro-business attitude on the part of Government and a constant supply of well educated young people.
These matters are all under review, including the implications of the tax regime. They will be kept under review by the Government and the Minister for Finance.
The Minister of State is aware that it will take some time to try to achieve agreement on the tax rate because it is not the Government's responsibility, it is that of the European Union. Has the Government initiated discussions with the European Commission regarding the extension of the 10 per cent tax rate?
As I stated earlier, the report of the international group should be available for presentation to the Taoiseach and the Government within the next two months. We have not yet approached the Commission, we will decide our strategy following that report. The matter will be kept under active consideration.
Is it correct that the international group has been given the responsibility to state whether the Irish Government should seek an extension on the 10 per cent tax rate?
No, the Deputy should take no such inference from my replies. Several Irish people serve on the international group in addition to people from other countries. We wish to benefit from the experience of such outside influences. The group's job is to advise me as to the priorities of continuing the success of the IFSC. When its report becomes available it will be submitted to the Taoiseach and considered by the Government in due course. However, I am chairman of a cross-departmental and multi-agency committee which will consider the matter from a domestic standpoint. Government policy will follow from what that committee decides is necessary and desirable in the circumstances.
One of the key issues the European Commission will consider, when examining whether Ireland should obtain an extension of the 10 per cent tax rate, is the number of firms situated "off site" from the Financial Services Centre. Many of these firms agreed to move on site within a short period and are receiving a tax incentive but not complying with the conditions involved. How many firms are in breach of the guidelines of the Government and the European Commission?
Approximately 180, almost 50 per cent of the total number. Plans have been put in place to extend construction on the Custom House Docks site. There are in the region of 11 cranes on site at present. The difficulty arises from the great demand for incoming business. We could fill the site with that business and leave aside those firms situated off site at present. However, the Government's objective remains to have all players on site at the earliest opportunity. We will continue to pursue this objective. It is good that, with plans to extend the site, we may need to make much of the existing space available to incoming firms.
The Deputy is correct, it is unacceptable that firms should remain off site. It remains an objective, as it was during his time as Minister for Finance, to encourage all licensed firms to move on site in due course.
I wish to bring these questions to a conclusion because progress is quite slow.
This is an important matter. The companies in receipt of this major tax break have several billions of pounds under fund management in this city. I am not criticising the Minister because I had to deal with this matter during my time as Minister for Finance. The reality is that these companies are in receipt of massive tax breaks and are not complying with EU or Irish law. Will the Minister give a clear indication of a deadline for such firms to move on site? Many people in the construction industry are unemployed and I do not accept that this matter is a question of space or the speed with which office blocks can be built. Many of the firms involved do not want to move on site and I support the Minister's efforts and endeavours to do so. These firms are saving millions of pounds by not moving on to the site.
Will the Minister of State inform the House if there is a deadline for their moving on site? If they do not we will not obtain the extension. I am sure the Minister of State will inform the House that the reason he could not obtain sanction from the EU for the extension is due to the fact that 50 per cent of the beneficiaries are not in the location approved when I was Minister for Finance. It will be a scandal of huge proportions if they do not move on site in the short-term.
The Deputy and I have shared this problem, as a former Minister for Finance he understands the background to it. Deputy Ahern is aware that when I became Minister of State at the Department of the Taoiseach I was given overall responsibility for the IFSC. There was only one builder on site at that time and progress had become sluggish. Competition from other construction firms, which should be the order of the day, has been introduced and, in due course, I hope this will help to solve the problem.