Dublin and Luxembourg are
Europe's main offshore centres. There are some 60
offshore locations around the world.
available in Jersey, Guernsey and the Isle of Man, differ
little from their onshore counterparts. Their advantage
is their tax free status with interest rolled over at
gross. However, that benefit is often offset by high
charges. There have been complaints that investors are
often lumbered with administration costs, without their
knowledge. The amounts are simply subtracted from the
Dublin is home to most of the world’s leading Financial
Institutions. In 1987 the Irish Government established the
International Financial Services Centre (IFSC) as a response to the
rapid growth of the sector worldwide, and the outflow of Irish
financial professionals who had to go abroad to find employment.
Ireland's overseas invetment promotion agency IDA Ireland says that
the IFSC is a prestigious integrated development located in central
Dublin which incorporates world-class office accommodation, educational
institutions, executive housing, restaurants and shopping facilities.
It has expanded beyond its original site and has become a vital part of
the wider Irish economy. In total, there are almost 450 international
financial institutions operating from Dublin with a further 700 managed
entities carrying on business under the IFSC program.
The IFSC now houses many of the world’s premier financial
institutions, together with the leading law firms and accountancy and
taxation advisors who support them. At its heart is the National
College of Ireland, which provides continuing education to the
financial professionals who work there.
Dublin has now developed into a world-class centre for a wide range
of internationally traded financial services. These include Banking,
Asset Financing, Leasing, Corporate Treasury Management, Asset
Management, Fund Administration and Custody, Futures and Options
Trading and International Insurance Operations.
Low Corporate Tax
A study by Deloitte
Consulting says that the Irish corporation
tax regime was cited as being one of the key reasons for originally establishing a base in Ireland. The low tax
rate together with an attractive suite of double taxation agreements were
The significance of the corporate tax rate in the
location decision cannot be underestimated. Introduced in 1987 as an inducement to
attract IFS companies to Dublin, the sector responded accordingly with a host
of operations established to take advantage of the 10% rate. As Ireland positions
itself as a centre for higher value activity, the 12.5% corporate tax rate is
tax position of companies carrying out approved activities prior to 31
July 1998 will remain unchanged at 10% up until 2010.
Offshoring continues to show high growth
Deloitte research recently completed a global survey of
the “Top 100” financial institutions to gain insights into this trend. Our
survey indicated that global players expect on average 20% of the industry’s cost base to
have moved offshore by 2010. In that time the 100 largest financial
institutions in the world will have moved nearly $400bn of their cost base offshore. Given that
approximately 3.5 million people are employed in the world’s top 100 financial
institutions and that 75% of the top 100 financial institutions are actively
pursuing offshoring strategies this could translate into approximately 500,000 jobs being
displaced (This is based on a 80:20 split between those retained onshore and
those moved offshore).
The larger global players are driving this agenda and
are actively pursuing strategies of relocating activities to lower cost
locations (both ‘nearshore’ and offshore). Notwithstanding this there is no single
defining strategy for offshoring.
Approaches being taken vary considerably and are
situational (i.e. they are dependent on the current organisation structure and
At present there is a strong indication of polarisation
between global financial institutions and small domestic players. The vast
majority of the largest FS companies are actively pursuing offshore relocation
strategies whereas the smaller domestic players are considering the