The Department of the Taoiseach, supported by the Department of Finance, has engaged with the international financial services industry in Ireland since the establishment of the IFSC in 1987 by providing a forum for the exchange of views and the co-ordination of effort through the mechanism of the IFSC Clearing House Group (CHG) and the related Working Groups. During this period, the IFSC has grown to employ 33,000 people and to contribute over €1 billion annually through corporation tax and payroll taxes. Last year the CHG prepared a Strategy for the International Financial Services Industry in Ireland 2011-2016 which is framed on the basis of an objective to create more than 10,000 net new jobs, to protect existing employment and business and to consolidate the sector as a key driver of the Irish economy over the next five years. This Strategy has been published and is available on both Departments’ websites.
The IFSC Clearing House Group (CHG) is a broadly based forum established to identify and consider issues of major concern to the continued and long-term development of the international financial services industry in Ireland. It considers issues such as the strategic development of new business opportunities, the progress of relevant legislation and it identifies, from time to time, the need for responsibility to be assigned for overseeing and reporting to the Government on any significant developments or initiatives for the international financial services industry in Ireland.
In the context of Budget and Finance Bill 2012, my Department considered submissions relating to IFSC tax issues from:
CHG Banking and Treasury Working Group — Tax Sub-Group,
CHG Banking and Treasury Working Group — International Asset Finance Sub-Group,
CHG Insurance Working Group — Fiscal and Accounting Sub-Group,
CHG Funds Working Group — Tax Sub-Group, and
Irish Banking Federation.
As the Deputy is aware, the recent Finance Bill contained a package of measures, designed to support the ambitious target of creating 10,000 jobs over the next five years as set out in the new strategy. In summary, the measures enhance the competitive position of the sector by:
reducing double taxation in the corporate treasury and aircraft leasing sectors,
providing clarity around the tax treatment of complex financial transactions in terms of stamp duty in particular,
addressing tax issues arising for investment funds due to the UCITS* IV Directive which was implemented on 1 July 2011, and
further easing the administrative burden in relation to non-resident investors in Irish investment funds.
None of the measures has a significant cost element and the majority are aimed at simplifying the tax treatment applying to complex financial transactions in order to make it easier to do business in Ireland. In relation specifically to the taxation of special purpose vehicles, I am informed by the Revenue Commissioners that there are no special rulings or authorisations related to special purpose vehicles.
Section 110 of the Taxes Consolidation Act 1997 provides that a special purpose vehicle may pay to holders of securities an amount corresponding to the amount of income it derives from the securitised assets. As the purpose of such vehicles is to transfer all the income and risk from securitised assets to the security-holders, payments to security-holders are fully deductible for tax purposes. The vehicle does not realise a profit and no tax liability arises. No additional tax would accrue to the State if payments to security-holders by the special purpose vehicles were not fully tax deductible, as the securitisation activity would not be located here in the first instance. *UCITS — Undertakings for Collective Investment in Transferable Securities.
