IFSC lobby group powerful in shaping policy

ANALYSIS: A total of 21 changes to the Finance Act were made to accommodate the financial industry

A CLEARING House Group is an unusual concept in the world of politics and public life. The Government at its highest official level and all the main players in a particular sector form a body with the ostensible aim of expanding and developing that sector. The body is chaired by the top civil servant in the country. A byproduct is that the sector gets unfettered access to lobby in its own interests.

Unsurprisingly, the homeless or unemployed organisations do not have a Clearing House Group, nor do other sectors such agriculture, tourism, or manufacturing. But the financial services sector does, in the shape of the IFSC Clearing House Group.

The group is chaired by Martin Fraser, the secretary general of Government. The main body and its subcommittees meet in Government Buildings. Civil servants and representatives from State agencies such as the IDA and Enterprise Ireland sit on it. The rest are made up of a who’s who of banking, financial and legal giants: JP Morgan, Citi, State Street, IBF, Barclays, Bank of Ireland, KPMG, Bank of America, Deloitte, AIB, William Fry, Ernst and Young and PWC.

Undoubtedly, there is strong justification for part of its work. Last year, Taoiseach Enda Kenny unveiled a strategic plan to create 10,000 jobs in the IFSC. There are also plans to develop a “Green IFSC” and an Islamic funds sector. That said, a series of requests under the Freedom of Information Act this year show the extraordinary influence wielded by the group when it comes to Government policy in two key areas: tax incentives for the industry; and the position adopted on the EU’s proposal to introduce a financial transaction tax (FTT) of 0.1 per cent on stocks and bonds; and 0.01 per cent on derivatives trading.

The Government’s eventual position on both issues dovetailed exactly with that put forward by the financial industry’s lobbyists, who supplied position and research papers; suggested draft legislation; and commissioned consultants’ reports.

A total of 21 changes to the Finance Act were made to accommodate the sector including a contentious incentive that allowed foreign executives with companies based in Ireland to pay tax on only 70 per cent of income between €75,000 and €500,000.

The Revenue Commissioners opposed another incentive that allowed executives to claim tax relief on school fees up to €5,000 but after further lobbying the relief was included in the Act.

On the latter, it was always a certainty that the Government would oppose the FTT. But records disclosed under FOI requests from The Irish Times, and an earlier request by Labour MEP Nessa Childers, show the extent of the engagement and the degree to which the Government and the sector worked in concert. The documents also show how the Government position closely reflected that of the industry on that key issue.

In all, the Clearing House Group and its subgroups discussed FTT at 13 meetings in Government buildings between October 2011 and May this year.

On October 11th at a tax sub-group meeting, the Department of Finance informed it that “input from the IFSC sector will be crucial to informing our views on the proposal”. Later, the language of the industry consensus almost mirrored the position articulated by senior Ministers in all public utterances.

Several senior Ministers also made the assertion that a similar transaction tax was applied in Sweden and led to the financial services sector deserting that country. That exact argument also happened to be included in a submission made by the Alternative Investment Management Association (AIMA) to the Clearing House Group.

There is nothing intrinsically wrong with lobbying but the Clearing House Group gives access to one sector that no other sector enjoys. In addition, there are no representatives of workers or unions, or other potentially interested parties, involved in the group. Nor is there evidence the Government invited views from any other group or bodies in Irish society on FTT.