The Taoiseach launched the Government's five year plan for the international financial services industry (“IFSC”) last month. This plan outlines the Government's target to “create more than 10,000 net new jobs, protecting existing employment and business, over the next 5 years, built on sustainable and responsible foundations”. The plan sets out seven key drivers to achieving this target; one of these drivers is a “transparent and competitive direct and indirect tax framework”.

In relation to tax, the main points set out in the plan are:

• The Government's commitment to maintaining the 12.5% corporate tax rate and the protection given to this commitment as part of the EU/IMF Memorandum of Understanding
• Changes to the current incentive regime in attracting key, highly skilled people, will be considered in order to ensure Ireland's attractiveness
• The expansion of the double tax treaty network will continue to be a priority
• Ireland's reputation as a responsible on-shore tax jurisdiction is essential to future success and will be protected
• Processes will continue to be improved to keep business overheads as low as possible through the effective use of technology
• The Department of Finance and the Revenue Commissioners will fully engage and consult with industry to enhance the tax framework
• The tax environment will remain responsive to changes in the financial services industry

The lack of incentives to attract highly skilled people is a self-inflicted wound, since not one, but several babies hit the ground with the bathwater when the Remittance Basis was abolished a few years ago.

We need to be doing more than merely “considering” incentives, otherwise the pipeline of Ireland-aware FDI decision makers which has served us so well will close over permanently.

Similarly we need to be selective about how we expand our DTA network. It's all very well signing treaties with countries like Moldova and Armenia, but the focus should really be on major trading, or potential major partners. The signal achievement this year on the DTA front was the renegotiation of the DTA with Germany, published last March. The current weakness in our economic situation may present negotiating opportunities. It must have been tough negotiating favourable DTAs when we were the the second richest country in the EU.

“Keeping business overheads low through the effective use of technology” is code, as far as tax policy goes, for more use of Revenue Online Service (ROS). Currently there are proposals to use a technology known as iXBRL to file accounts on ROS. This must be approached with great caution – a similar initiative in the UK has caused chaos. Neither Revenue nor business need the unproductive overhead of coping with a flawed administrative system.

The real significance of the IFSC Strategy may be twofold. Firstly, there is the recognition of the contribution the IFSC makes. Secondly there is the recognition that tax policy and tax incentives play an important role in commerce and business decision making. Despite some of the events of the last few years such ideas should not be allowed to become taboo.

The full text of the ‘Government's Strategy for the International Financial Services Industry in Ireland 2011–2016’ is available at http://www.merrionstreet.ie/wp-content/uploads/2011/07/IFS-Strategy-2011.pdf. Enda Faughnan, Tax Partner with PricewaterhouseCoopers, reviews the IFSC Strategy in this issue of tax.point on here.