IDA's silence says it all as Belfast is gifted a mini-IFSC

BUSINESS OPINION: If jobs are the yardstick, then the tax gods have smiled more on the UK than the Republic.

THE TAX gods both gaveth and taketh away last week in what was an interesting week for the IDA. But the unanswered question is whether they did so in equal measure.

The deafening silence from IDA headquarters in the wake of Peter Robinson's announcement that Belfast's Titanic Quarter is to become a mini-IFSC with the support of the Irish Government pretty much says all that needs to be said about how the IDA took the news.

It's little short of a disaster from their point of view. The IDA has spent a good part of their efforts over the last 20 years building up a financial service hub in Dublin of some global significance. It may never have had any serious pretensions of being a true rival to London or New York, but it was very successful in what it did set out to do; attract middle- to low-end financial services jobs to Ireland.

Sustaining the momentum that has been built up at the IFSC as the global banking industry contracts and Irish costs escalate is one of the big challenges that now faces the IFSC. Last week's news is tantamount to tying one of its arms behind its back in this fight.

If the fine words of last week are to mean anything, the IDA will have to at a minimum sit back - if not actually lend a hand - as its Northern rival Invest NI sets about promoting Belfast as offering the best of both worlds; higher productivity and access to the Republic's low tax rate by the back door.

Given that the IDA will still be judged by how many jobs it creates in the Republic rather than assists in the North it might be optimistic to think that it will just roll over.

It is not a given that Belfast is a more competitive location than some of the regional towns that the IDA has been targeting for such jobs and will continue to do so.

It is also the case that the Republic has a 12.5 per cent corporation tax: end of story. All the elaborate schemes and structures that have been put in place over the years to get multinationals to come here are built on that simple foundation.

The cross-Border schemes that will now have to be dreamt up to really leverage the lower cost base in Northern Ireland threaten to be truly Heath Robinson affairs.

But last week's initiative undoubtedly has very significant political backing, although you could be forgiven for thinking the opposite given the complete lack of any subsequent comment from the Government on the issue.

Such are the sensitivities of the issues raised that the Department of Finance did not even circulate the remarks made by the Minister for Finance and Taoiseach-designate Brian Cowen at the announcement in Belfast.

But fundamentally it is a political initiative. It requires no new legislation North or South. All that is needed is a favourable interpretation of the existing legislation by the Financial Regulator and the Revenue Commissioners and they will take their lead from their political bosses. And so ultimately must the IDA.

The other bit of cross-Border tax news from last week also seems to have taken the IDA by surprise.

The agency claims to have had no active role in the decision by UK drug maker Shire to move its tax residency to Ireland, although it would have been instrumental in the holding company legislation that facilitates the move.

Shire for its part confirms that Ireland's holding company regime was not actively marketed to it by the Irish authorities; but was just one of a number of options that came up as a result of a fundamental review of its tax affairs.

There must obviously have been some contact, but according to Shire they were following the path already trod by Experian, including the use of a Jersey-based vehicle.

And as Shire are keen to point out, they are only going to do the minimum required to satisfy the various tax authorities that the corporate heart and mind of Shire now resides in Ireland.

This might amount to little more than having board meetings here, and certainly does not promise a jobs bonanza.

But if the IFSC is really heading North, one suspects that the IDA's new chief executive Barry O'Leary may soon be on the phone to finance directors of the rest of the FTSE 100.

As he does so, it will no doubt not be lost on him that the same "corporate heart and mind" concept that will allow Shire claim residency here for tax purposes, is the same construct that will enable financial services companies to be taxed and regulated in Dublin, while moving jobs to Belfast.

If jobs are the yardstick, then the tax gods have smiled more on the UK than the Republic.