Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank Senators from all sides of the House for their thoughtful contributions to the debate. I look forward to re-engaging with Senators on Committee and Report Stages. I wish to acknowledge, as I did at the outset, the cross-party support which has been received for this Bill in both the other House and, it seems, this House. I am very grateful for this.

I echo Senator O'Donovan's comments. This is an Ireland Inc. issue. No one party, Government or series of Governments can claim credit for the international financial services, IFS, strategy. It is a strategy which has been correctly pursued by many. I also think it is sometimes unfair for IFS to be muddied with some of the domestic banking issues. This is perhaps a debate for another day. However, the Government in the 1980s which thought of the idea of developing Ireland as a hub for IFS and, as alluded to by Senator O'Donovan, creating the IFSC to regenerate an area and create employment at Dublin's docklands, certainly succeeded in this ambition and much more.

In 1987, there were three companies operating in international financial services in Ireland employing 55 people. By the end of 2014, there were over 200 companies and 35,000 people employed in international financial services. A crucial point, on which Senator D'Arcy touched with regard to regional development, is that over 10,000 of the 35,000 jobs were outside Dublin. The question we now have as a Government, a country and an Oireachtas is where we go next with international financial services.

When the Taoiseach appointed me as Minister of State with responsibility for international banking and the IFSC in July, I set about doing a number of things to co-ordinate Ireland Inc.'s effort in terms of marketing and branding the country as a location for IFS. It is not all about tax. It is about our skilled workforce, the ease at which people can do business and the fact that we are the only English-speaking country in the eurozone. I am currently devising a new strategy for the international financial services sector which will go to Cabinet at the end of February, be launched at the start of March and be promoted as part of the St. Patrick's Day trade missions.

For the first time, we now have the IDA, Enterprise Ireland, the Department of the Taoiseach, the Department of Finance and the Department of Foreign Affairs and Trade sitting around the table on a fortnightly basis, chaired by me and presumably my successors in future Governments, saying where we are going with IFS. This is really important.

I wish to respond to a number of issues raised during the debate. The regulation of funds was mentioned by Senator O'Donovan. This Bill concerns the creation, establishment, operation and possible end-of-life rules for the vehicles which house the funds. The Central Bank will continue to regulate these funds under the UCITS rules or the rules applying to alternative investments funds, AIF, under the AIF rule book or the AIF managers EU regulations.

There was a broader point in the debate with which we need to be careful. We are not creating new risk. The risk already exists. There is already the level of funds, about which Senator D'Arcy and Senator Gilroy spoke, in this country being domiciled through this country and which is of great benefit to this country. The issue is how we regulate them. I would contend, very strongly, that it is important in a regulatory system to have credible regulation. Credible, robust regulation needs to ensure appropriate regulation is being thrown at a fund.

There is no point pretending an investment fund is the same as a traditional company when it simply is not. Our competitors do not do this. I know Senator Reilly had to leave, but we are not just speaking about Luxembourg. We are speaking about our neighbours in the UK, France and many other European countries. This is not about lessening regulation. This is about how we treat an investment fund. Should we treat it as a company when it clearly is not the same as a traditional company? I am sure we will tease this out on Committee and Report Stages.

A lot of what this Bill is about and a lot of what has taken up my officials' time has been cross-applying the Companies Act and ensuring that every single part of the Companies Act which is relevant to an investment fund is applied and that which is not relevant is not applied, ensuring that where the Companies Registration Office has not got a role that the Central bank has a role and checking, when it comes to sanctions, that the Office of the Director of Corporate Enforcement or the Central Bank has a role. We have put a lot of time and effort into ensuring this Bill is as robust as possible, including having a very productive debate in the other House.

Senator Reilly asked from where did this come. It very clearly came from the IFSC strategy. I feel very strongly when people say they have problems with Bills coming from certain aspects of industry. If I was the Minister for agriculture and had met with a load of farmers and farmers said this is what needs to done to help revitalise agriculture, I am quite sure Members on all sides of the House and I myself would say it is right and proper that the Minister for agriculture would listen to the farming community. I similarly think it is right and proper for me, as Minister of State for the IFSC, to listen to the IFS community, while remembering, as the Minister for agriculture must with regards farming regulations and safety, the responsibility the Government, these Houses and I have with regard to regulations. I will not stand for and will not answer snide comments about business interacting with Government. Some 35,000 people are employed in the international financial services sector. It is pretty important that any Government of any hue would talk to those people.

On the issue regarding Senator D'Arcy's point, echoed by a number of Senators including Senators Barrett and Gilroy, on whether this country would be on the hook - I think this was the phrase used by Senator D'Arcy - I am pleased to clarify that the answer is absolutely not. This is different to traditional banking in the sense that investors are aware that the value of the investments they make can go up and down. It is obviously not the same as a bank deposit in that sense. I will come back to the Senator with a detailed note on it because it is an important question. It is important to note that these are investment funds and there is a warning that the investments are at risk. This is different to banking and financial stability matters. The State is not on the hook for loss of investment. The State has obligations under the investments services directive under EU law. It is important to note this difference also.

I am checking if I have answered everyone's questions on this matter. If I have not, I ask that the Senators would come back to me. We will have other opportunities to tease this out at a later stage.

On Senator's Barrett point on regulation, we have very new regulatory structures in place. We have seen significant reforms within the Central Bank. We have seen the regulator being subsumed, for want of a better word, into a unified structure within the Central Bank. We have seen significant efforts at European level to beef up regulation, rightly and properly. I, in my role as Minister of State for the IFSC, consider it extremely important to have a business-responsive Central Bank which will engage, consult and provide information, but equally that the State would provide the Central Bank with all the resources and support it needs to implement robust regulation. This is important.

Senator Barrett referenced the issue of tax. I wish to reiterate this point on the US. The ICAV is a more practical form of investment from a US investor's point of view because it can be treated as what is known as a transparent entity for US tax purposes. This does not have anything to do with tax avoidance, but rather it allows the US investor bring forward his or her liability and avoid penalties and interest which could accrue.

It is making it easier for investors in the United States to pay their tax liability. I wish to clarify that it is not lessening the tax liability but, rather, it is not allowing penalties to accrue.

On the question of Ireland's reputation and international tax, the Minister, Deputy Noonan, took a decision in the budget, in light of - as the Senator quite rightly says - our reputation and the three Rs relating to foreign direct investment, two of which are reputation and regime. The base erosion and profit shifting, BEPS, process raised a number of issues. The Minister decided that, rather than waiting for a process to bring us to an endpoint, we should get out ahead of the issue, to clearly and definitively end the double Irish arrangement while at the same time proudly defending Ireland's corporation tax rate. It is important to note that a number of countries that might raise issues with regard to Ireland's corporation tax rate actually have a lower effective rate. At least the Irish rate is very transparent, and we will be vigorously defending some of the cases to which the Senator alluded. We are also co-operating on the OECD BEPS process and we are participating in an advance implementation group in many areas.

This country favours an international tax system that links substance with tax because, unlike some other countries, we have a lot of substance. The investors I meet who want to come to this country are coming here because of our skilled workforce and our access to the eurozone. I agree that they also come because of our corporation tax offering, but that is only one small piece of a much broader and larger package that we have to offer.

On the occasion of my first appearance in this House dealing with Second Stage of a Bill, and as a Minister of State with responsibility for the IFSC, I thank Senators on all sides for their constructive contributions. I look forward to the continued passage of this Bill through the Oireachtas. In doing so I am confident in the belief that this legislation will be another important offering in the toolkit of Ireland Inc in attracting more jobs and investment into Ireland.