The imminent end on December 31st of the original International Financial Services Centre (IFSC) regime, which will see companies operating in the sector move back into the normal Irish tax regime, will have a detrimental affect on some international financial services (IFS) sectors unless the tax system is amended in Finance Bill 2006.
The key provisions which need attention are: the interest withholding tax regime, deductibility of trading interest and, the ring fence on leasing losses.
The industry is currently vigorously lobbying with the Department of Finance to initiate changes in these areas, or risk losing key attractions of Ireland’s tax regime, and hence the risk of losing companies and jobs.
The key areas at risk unless the provisions are changed in the Finance Bill are the group finance, treasury and asset financing sector.
Writing in this month’s KPMG Tax Monitor on page 12, editor Brian Daly says that the Department needs to ask the question, ‘do we want Ireland to be a major centre for treasury management and for big ticket leasing? Even though doing so will yield us almost no tax revenues from other sources, do we wish to kill off these sectors?’ Even if, incredibly, the answer were ‘yes’, Daly argues that, ‘we should not forget that you cannot kill two of the principal pillars of an international financial service industry and hope that the remaining sectors will flourish unaffected’.
Praising the role the Department of Finance has played to date in driving the development of the IFS sector, Daly adds that, ‘the Department now needs to respond in a similar manner to ensure that the success can be continued. This must all be done in a way which will allow the overall Irish tax package to be satisfactory in an EU context’. |
