The influence of the Clearing House Group, composed of executives from the financial industry, accountants and senior civil servants, has again come under scrutiny. The declared function of the group, established in 1987, is to “assist the growth and development of the International Financial Services Centre” which now employs 33,000 people and contributes about €1billion annually in corporation and payroll taxes. Successive governments have taken the view that aggressive tax competition policies are justified by the results. This country’s major trading partners, whose revenues are affected by tax avoidance schemes, do not agree.
In recent months, Ireland was publicly identified as a “tax haven”. It was a charge rejected by Taoiseach Enda Kenny who said we followed OECD rules. In truth, similar tax avoidance services are offered by the Netherlands, Luxembourg and Switzerland. Britain has recently made competing offerings. That free-for-all will end if an OECD proposal to replace dual tax-treaty networks with a multilateral convention is adopted.
The ability of the Clearing House Group to influence Government policy and secure budgetary concessions has been detailed in this newspaper. At a time of cutbacks in most other areas, it suggests that financial interests enjoy special access and influence. They do. The current programme for government looks to the sector to create 10,000 additional jobs. In response to public unease, however, the activities of the Group have been made more transparent and minutes of its meetings are now published.
Oversight of the International Financial Services Centre falls to the Central Bank. Its powers were recently strengthened by the Central Bank (Supervision and Enforcement) Act, 2013. That legislation also provided for consumer protection. The Financial Services Ombudsman William Prasifka had complained that because companies could not be “named and shamed” there was no incentive for them to improve their treatment of vulnerable customers. Year after year, the same institutions behaved in the same unacceptable fashion while the Ombudsman listed a growing number of valid complaints. But, last month, Minister for Finance Michael Noonan specifically withheld this important and long-awaited power. Disclosure would have enabled customers to analyse the performance of financial service providers and help them to make informed decisions. Those crucial details will not now be published. It is not good enough. The outcome suggests the Government lacks nerve and a sense of balance in dealing with financial institutions and protecting ordinary citizens. As the international taxation climate changes, nimble responses will be required to protect Irish interests. The Government should begin by supporting consumer rights.