DUBLIN'S INTERNATIONAL FINANCIAL SERVICES CENTRE
Hedgeweek Special Report on Dublin Hedge Fund Services 2006 - This June 2006 report highlights the significant strides made by Ireland in positioning itself as the leading hedge funds services centre in Europe.
The Future of the International Financial Services Industry in Ireland - Deloitte and IDA Ireland
Companies located in Dublin's International Financial Services Centre
IDA Ireland - Irish State Overseas Investment Promotion Agency

Dublin and Luxembourg are Europe's main offshore centres. There are some 60 offshore locations around the world. 

Offshore funds 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 fund performance

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 considered important.

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 critical.

The 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 operating model). 

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 competitive impact. 

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