Responsibility for any abuse of Irish companies by foreign investors lies with the Government, two company formation agents have claimed.

Mr David Murphy, Dublin divisional manager of the SCF company formation specialists, says the failure of successive administrations to close off loopholes and introduce comprehensive tax planning legislation has undoubtedly encouraged some dubious use of Irish registered companies.

He believes that many of the problems that have arisen could have been avoided through effective legislative changes.

"The problem is that there is no regulation of non-resident companies which are registered in Ireland. Since Britain changed its law in 1989, making companies registered there liable for tax, that business has been filtering into Ireland but there has been no legislation to reflect this situation," Mr Murphy says.

SCF, which has its headquarters in Britain, is part of the Offshore Institute, a small lobby group, which he claims has made representations to Government to introduce effective legislation in this area.

One of the long established Irish company formation specialists, Inter Company Comparisons, has also sought regulation. In 1995, in a submission to Government, ICC stated that the firm together with its clients would fully support any proposed measures related to non-resident companies that would reaffirm Ireland as a "reputable jurisdiction with credibility to match". Its managing director, Mr Jon Rock, says these views are as valid today as they were in 1995.

The firms acknowledge the relative ease with which companies can set themselves up to appear as if they are operating as part of the IFSC. And they highlight how Irish company law makes this possible.

According to Mr Murphy, the Companies Registration Office allows the use of certain words when registering a company name in Ireland. "Companies can for instance set themselves up as trading as a reinsurance group, without immediately coming under the supervision of one of the regulatory bodies. Similarly, you cannot use the word insurance in the company name without receiving formal approval [but] the use of the word insurers, is not prohibited," Mr Murphy says. "Instead of killing the non-resident Irish companies arrangements off completely we have called for the Government to legislate in a way that will allow them to continue while protecting the reputation of the International Financial Services Centre," he adds. Mr Rock agrees that the operators of some non-resident companies bring Ireland into disrepute. "They cast doubts on the effectiveness of our supervisory authorities, in particular through confusion with companies operating at the IFSC."

He adds that while ICC would readily welcome adjustments to the regulatory regime governing Irish non-resident companies, it would be very concerned if the approach adopted were unduly to damage its reputation as a vehicle for tax planning internationally.

Mr Rock warned that any threat to the legitimate use of these companies for international tax planning would trigger a substantial loss of funds to the Exchequer and to the entire economy.