THE International Financial Services Centre (IFSC) in Dublin is being targeted by other EU member states who believe their national exchequers are losing revenue to Ireland. The special tax haven position of the IFSC is on the agenda of a meeting in Brussels on Thursday chaired by the internal market commissioner, Mr Mario Monti.
The 400 IFSC companies now manage over £21 billion in funds and employ more than 3,200 people, outstripping traditional tax havens like the Channel Islands. Even with a 10 per cent tax rate, they pay an estimated £200 million in corporation tax to the Exchequer. Other EU member states, Germany in particular, believe the IFSC's preferential tax position should be curtailed. Mr Monti has been asked to establish an EU wide code of conduct to end "tax piracy" within the Union where international investors are lured with the promise of special tax deals.
A spokesman for the Minister for Finance, Mr Quinn, said yesterday there was pressure from some member states to create tax harmonisation throughout the EU. The spokesman added that the Government was aware IFSC based companies were anxious to know what their tax position would be when the 10 per cent rate ends in 2005. He said Mr Quinn would be making an announcement "before the summer".
Government sources told The Irish Times that Germany's economic problems were now so acute that it was examining every leakage of tax revenue. As well as the IFSC, Germany is looking at Luxembourg, where it believes German residents are avoiding billions of pounds of tax.
The largest fund manager in the IFSC is Deutsche Morgan Grenfel Ireland, a subsidiary of Germany's biggest bank. It manages fund of just over £7 billion. Most of the large German banks have operations in the IFSC.
Last week, the German Finance Minister, Mr Theo Waigel, called for tax harmonisation to bring about "a culture" of tax fairness among member states.
Ireland's 10 per cent tax rate for manufacturing industry is also coming under pressure. Government sources said the Belgian government was angry that Boston Scientific announced it was moving its European operations to. Galway because of the favourable tax regime in Ireland. The move means the closure of the company's plant in Belgium.