Vol. 498 No. 6
4 Mr. Noonan asked the Minister for Finance the discussions, if any, he has had regarding the concerns of the German tax authorities that the International Financial Services Centre is being used by German finance companies for tax evasion purposes; if he plans any policy changes in respect of the centre; and if he will make a statement on the matter. [28069/98]
As the Deputy will be aware, I have recently had discussions with Mr. Oscar Lafontaine, the German Finance Minister, on a number of issues, including tax matters. The question of the IFSC being used by German finance companies for tax evasion purposes was not discussed as it does not arise.
Can the Minister confirm that the Taoiseach's special adviser, Dr. Martin Mansergh, had discussions recently with German bankers on this issue? Was the Minister briefed on the conclusions of those discussions and will policy decisions be taken arising from them?
The article in one of the national newspapers was based on a memorandum which was prepared by German bankers based in the International Financial Services Centre. In it they outlined their concerns about the uncertainty created by German controlled foreign company tax legislation in relation to the activities of German banks in the IFSC and also their views on our corporate tax regime. That memorandum was sent by the German bankers to Dr. Martin Mansergh who forwarded it to the Secretary General of my Department.
I reject any implication that the IFSC is a tax haven. It is not a tax haven under any guise, but an International Financial Services Centre and is recognised as such. It is properly legislated for and controlled. There are no brassplate operations there. Tax havens are places where there is no regulation and there are brassplate operations.
I agree with the Minister on that point. Can he confirm there is a mechanism in German tax law whereby tax on earnings of a subsidiary can be recovered from the parent company in Germany if the corporate rate of tax which applies to the subsidiary is below 30 per cent? What are the implications for that trigger mechanism arising from the Minister's decision to reduce corporate tax to 28 per cent?
The Deputy is correct that there is a trigger mechanism in German tax legislation. If the Irish tax rate goes below 30 per cent, which is the trigger mechanism rate, it should not have any major impact because German tax legislation incorporates a provision which exempts income of substantive projects.
