Address by Frank Daly, Chairman of the Revenue Commissioners at the Launch of "Taxing Financial Transactions"
Published by the Irish Taxation Institute, Westin Hotel, 5 April, 2005
President, Ladies and Gentlemen
It may be interesting to start with a little history. Most people here will know that the original "bible" on the subject of the taxation of International Financial Transactions was published in 1991 under the auspices of the Tax Administration Liaison Committee (TALC). It was a very important publication for two reasons.
Firstly, at that time the International Financial Centre business in Ireland was growing at a great pace and there was a very strong (if perhaps not absolutely clearly articulated) feeling that some guidance was needed for people working on all sides (Business, Practitioners and Revenue) in that general area of business.
Secondly TALC itself was a somewhat fragile entity with different camps,
some lack of understanding and even mistrust in regard to what it was
doing - those on TALC were seen as part of an inner circle and there was
little transparency about its work - no minutes for example were published.
How things have changed there!
So the bright idea emerged within TALC of publishing something which would be of real value and at the same time give the fledgling group a more positive profile - thus emerged the 1991 bible "Taxation of International Financial Transactions in Ireland". That book, which truly was the bible for many years, was a joint effort between Revenue and other members of TALC at the time and it quickly became and has largely since remained the main source of reference for practitioners, Revenue staff or anyone working or advising in this area.
The book we are launching tonight, "Taxing Financial Transactions" is also a co-operative effort. It is comprised of commentaries by various eminent tax advisors on the Irish tax treatment of both domestic and international financial services. Revenue officials were very involved in a consultation process on the preparation of the material in the book. A number of specialist officials participated in a forum specifically set up to discuss the drafts as they were written. Other Revenue personnel were involved in reading the final drafts to ensure that the contents reflect current Revenue thinking on the various tax matters discussed in the book.
Why a new book?
Well things have changed - in the economic and tax environment we've had
the introduction of the € and the abolition of the 10% rate of Corporation
Tax applicable to certain activities and its replacement by a more general
rate of 12.5%.
Perhaps more directly relevant we've also seen huge business and product development in the financial services area.
Since the establishment of the IFSC in 1987, Ireland has been enormously successful in developing an international financial services sector. The Deloitte Report has estimated that there are 20,000 people employed in IFS in Ireland. This does not count the substantial numbers involved in providing professional services such as legal and tax services to the industry.
In 2004 the Corporation tax take alone from institutions trading in the IFSC was around €663 million - the amount paid by all banks and financial institutions was €1.3 billion (almost 25% of the total Corporation Tax revenue in 2004)
The number of funds administered and managed in Ireland has grown enormously. The latest industry statistics from IFSRA lists the number of Irish domiciled funds at over 3600 with a value in excess of €400 billion - this from a base of zero in 1987. And Ireland is also rapidly growing as a securitisation center.
So we have a constantly evolving industry with new products and financial instruments emerging almost on a daily basis. The taxation of such financial transactions is a highly complex area requiring enormous tax and legal expertise. Tax law is challenged to keep pace and Revenue, tax practitioners and those working in the industry need clarity and reliable guidance. We must bring as much certainty as possible into the frame.
It is in this context that the TALC book, while innovative in its day, had reached the end of its useful life and this new book, now comes into its own. It reflects these environmental changes as well as dealing in great detail with the tax implications of many financial service transactions such as €bonds, funds and asset management, securitisation, leasing and the taxation of the various forms of financial instruments.
To the extent that this book provides clarity and guidance it will be
of enormous assistance to those doing business in the financial services
area in this country and to their advisors. And by doing so the book also
contributes significantly to the continued development of the financial
services industry in Ireland.
I am therefore very pleased on behalf of Revenue to be associated with the launch of this book this evening. I congratulate all involved in its production - the very eminent authors who have managed to bring light into this complex arena, the Revenue staff who were involved in the consultative and draft reading stages and the ITI who have taken on the mantle of publication with, as usual, the professionalism and standards of excellence with which we have now become familiar.
I hope nobody will be upset if I pay special tribute to Cora Murray who I understand ran the co-ordinating Committee and "volunteered" all the authors in this project.