The thousands of non-resident companies registered in Ireland are believed to be generating fees of more than £40 million a year for Irish accountancy firms, company formation groups, solicitors and other financial services businesses.
Investors can set up such companies easily, primarily using company formation firms which can register a company in a matter of hours. They can also provide a list of directors to meet the requirements of Irish company law and administer the various transactions necessary for a fee.
It is understood that a number of international company formation specialists have been aggressively marketing Ireland as a location for offshore companies - particularly throughout Russia and Eastern Europe in recent years.
They are believed to highlight the Irish tax regime which is unique among EU member-states in allowing non-resident companies the freedom to set up without incurring tax liabilities to the Revenue Commissioners.
Company law in Britain has been amended to ensure that all companies registered there, regardless of whether they carry out any business in that state, are liable to pay tax at British rates. A similar initiative is understood to be among the options being considered by the Government-appointed working group currently examining the issue.
Irish company law, as it stands, also allows investors to distance themselves from the actual company structure, making it virtually impossible to determine the identity of the beneficial owners.
And because Ireland's International Financial Services Centre is marketed internationally as a well-regulated centre, an Irish base also affords some degree of respectability with the regulatory authorities in other jurisdictions, even though the companies involved have nothing to do with the IFSC here.
In some cases, companies have been registered in names that would suggest that they are operating in the IFSC. Some companies are believed to operate reinsurance, which, while carried out legitimately by companies at the IFSC, is not regulated here. Others list their activities in Companies Office applications as "general trading".
Those companies portraying themselves as reinsurance groups or as part of an international trading house, may appear in their local domicile to come under IFSC regulations.
The widespread use of these offshore vehicles has generated very negative publicity for the IFSC internationally and there are concerns its reputation could be tarnished.
