A TAX exemption scheme should be introduced for holding companies, according to a former tax, adviser to the Industrial Development Agency.

Such a scheme would mean that Irish multinationals would no longer have to locate an intermediary holding company in a third country and could invest directly from Ireland, said Ms Mary O'Sullivan a tax partner with chartered accountant O'Sullivan Keogh. Foreign dividends and capital gains of holding companies should be exempt from tax, she said.

"At present Ireland is an unsuitable location for holding companies as dividends from foreign subsidiaries are taxed at a rate, of 38 per cent and any gain arising on the disposal of such subsidiaries is taxed at 40 per cent. This high level of taxation on foreign subsidiaries is in marked contrast to the tax regimes operated by most of our partners in the European Union where dividend received from foreign subsidiaries are tax exempt," she said.

Changes in the tax rules would make Ireland an attractive location for holding companies beach of which would create at least 10 additional jobs", she argued.

The Forfas policy document published last week supported this proposal, she added.