Minister for Finance Brian Cowen should be given the power to designate countries for double taxation relief before Ireland makes double taxation agreements with them, according to the Irish Bankers' Federation.
The federation says the power to make such designations is one of several measures required from the Government in order to protect the International Financial Services Centre (IFSC) after the ending of the special tax regime there.
The 10 per cent corporation tax rate that applied to IFSC companies since its inception in 1987 was increased on January 1st to the same 12.5 per cent rate that applies to all other companies that operate in the State.
The change was well-flagged, but the federation's deputy chief executive Enda Twomey says that special action should be taken to offset any negative impact on the competitiveness of the sector.
The legislative and regulatory regime governing the centre must be updated to protect it in the future, he says in a article for this week's Finance magazine. He criticises the time needed to conclude so-called double taxation treaties and says that a special designation should be made pending the conclusion of such negotiations.
Many of the world's biggest international financial services groups have located back office activities in the IFSC, but Mr Twomey says the activities there should be diversified rapidly if jobs in the sector are to be safeguarded. "The longer it takes to diversify and grow the business, the more susceptible the company becomes to global corporate decisions unfavourable to the Irish-based operation."
Mr Twomey says the Government should assess the international competitiveness of Ireland's tax and capital adequacy regimes for financial services companies.
He also calls for certain legal and regulatory measures to be introduced to sustain the attractiveness of the IFSC to foreign companies. He also calls for the establishment of a financial law review group with a view to simplifying and updating the legal regime applying to financial service companies.
Some 17,000 persons are now employed in both international and domestic companies there.
A strategic review of the sector was initiated late last year by Dermot McCarthy, secretary general of the Department of An Taoiseach. The review is due to conclude shortly.
