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Dáil Éireann debate -
Tuesday, 7 Nov 2000

Vol. 525 No. 2

Ceisteanna – Questions. - E-commerce in Financial Services.

John Bruton


8 Mr. J. Bruton asked the Taoiseach the number of copies distributed of the document, Statement of Irish Government Policy: e-Business in Ireland for the International Financial Services Industry; the measures his Department is taking to support the drive to bring the IFSC to the next stage of development as a leading location for international financial e-business; and if he will make a statement on the matter. [19747/00]

I officiated at the launch of the "Statement of Irish Government Policy: e-Business in Ireland for the International Financial Services Industry" document on Tuesday, 12 September with Michael d'Souza of Merrill Lynch, who chaired the e-commerce sub-group of the IFSC clearing house group, and Sean Dorgan of IDA Ireland, which is distributing the booklet through its overseas offices. The booklet has been laid before the Dáil and the Seanad. My Department distributed 3,000 copies of the document. There has been a very high level of demand for the booklet and a further print run is likely.

It will be used by IDA Ireland in promoting the benefits of Ireland as a location in the emerging electronic environment. It is also being used by leading figures in the financial industry in promoting Ireland within their institutions. There has been very positive feedback in this regard from the industry.

The e-commerce sub-group consisted of industry representatives and members of relevant Departments and agencies. The e-commerce working group has now reported back to the clearing house group on issues to be addressed in developing the IFSC further in the light of technological change.

The main findings of the working group were that the key determinants for the expansion of e-business within financial services here are similar to the generic needs identified by other bodies, such as the Information Society Commission.

Needless to say, the Government will continue to focus its efforts on developing Ireland as a centre for international financial services. E-commerce will form a vital part of the Government's approach to that.

Is it not the case that Ireland's ambition to be an e-commerce centre will not be achieved unless the VAT rate is reduced?

As I said recently to Deputy Bruton, that is one of many issues. The concern is that until this area is tied down, which it is far from being in either Europe or the rest of the world, people will continue to move where they can get the lowest rates of value added tax.

However, that is only one of the issues. The major issues in this area are that we have the facilities, staff and people who are prepared to change quickly, that we are prepared to change our regulatory system, we have broadband connectivity throughout the country and that we keep ourselves abreast of changes and update our services – in this case, financial services – to accommodate the vastly changing position.

Is it not the case that our VAT rate is about five or six points higher than most of the countries in Europe with which we will compete for e-commerce? In the present cost conscious world, what business can function effectively if it has such a five percentage point cost handicap?

The financial services industry is remarkably successful and this report progresses from the enormous strengths of the industry as it stands today. The industry is growing massively at present and that is why it is looking at e-commerce. There has been an incredible 60% increase in fund assets within Dublin and most of the schemes use information technology. The total amount of money being managed has reached US$176 billion. The IFSC, particularly the fund sector, is now global. A total of 50% of the funds are from the UK. The US is the largest originator and Germany, South Africa and Italy have increased their share dramatically. Most of the top banks in the world are operating, in one way or other, out of the centre.

What the centre must do to protect itself as it changes – it will change over the next ten years – is look at how best it can sell itself as a leading location for financial services business. One of the elements of that is VAT but it certainly is not the one of most concern at this stage. Both the IDA and the financial services industry, through their companies, clients and new clients around the world, have to sell the centre in a positive fashion and ensure they have the ability in a global market to do those figures and that amount of business. It yields approximately £0.25 billion in tax revenue for this country every year. All aspects of that will have to be looked at. In the meantime, the document which I launched in early September is being promoted worldwide by the companies and the clearing house group I mentioned.

Is the Taoiseach saying that the VAT rate is not a major concern?

I will not answer questions on whether the VAT rate will go up or down. This group examined comprehensively what we should do to make Ireland an e-commerce centre. Enormous progress is being made in this area. The figures I mentioned are just part of what they are doing. They have already identified what they are required to do. The VAT rate is one of the many issues that have to be addressed but it is a matter which will be dealt with in the budget and the Finance Bill, not as part of an e-commerce report.

It is the view of my party that unless the VAT rate issue is dealt with, there is no likelihood of success in developing Ireland as an e-commerce hub. I am disappointed the Taoiseach's answers have been so vague in that regard.

I am sure the Deputy will acknowledge the enormous progress made by the financial services sector in moving ahead of most other financial services industries. Whatever about the VAT rates, it has made an enormous leap ahead of practically all other financial services centres.