Capital duty on shares should be abolished to maintain the competitiveness of the international financial services sector, according to the Federation of International Banks in Ireland (FIBI). John McManus reports.

FIBI, which is part of the Irish Bankers Federation, has called for the change in its pre-Budget submission to the Minster for Finance, Mr Cowen. Over the last few years a number of EU states have either abolished or reduced the tax which charged when a company raises capital through the issue of shares.

But in Ireland it remains at 1 per cent, and this puts Irish companies and financial services organisations at a disadvantage, according to Mr Michael Ryan, the chairman of the FIBI.

Although the current rate is low it can tip the balance against Ireland for companies looking to locate in Europe, argues Mr Ryan who is also chief executive officer of Merrill Lynch Capital Markets Bank Limited.

It also puts Irish based companies at a competitive disadvantage, says FIBI. "This is particularly evident when taking a direct comparison of an Irish company in competition with a company based in another EU state that does not impose such a duty - e.g. the UK - in a particular transaction for which both companies must raise equity finance," according to the submission.

Capital duty on shares applies to all Irish based companies and brings in around €30 million a year in tax revenue according to the FIBI. Its abolition will complement the changes to the holding company regime announced in last year's Budget, Mr Ryan says.