Will tax increases dent Dublin as a financial centre?
In spite of the problems affecting Ireland's banks, Dublin's reputation as a location for back office work is still attracting new entrants, which is has propelled it into the top ten of global financial centres. However, with changes to the tax regime on the cards, could its competitiveness soon be undermined?
The latest Global Financial Centres Index (GSCI) compiled by consultancy Z/Yen on behalf of the Corporation of London, has seen Dublin move up three places, from 13th to 10th.
The report describes Dublin as an "attractive destination for investment and corporate tax residence", in spite of the problems affecting the economy as a whole.
However, before the champagne corks start popping, it's worth pointing out that the survey carries both a ranking and a score (a mark out of 1,000) and Dublin has actually lost seven points - it's just that other cities have fared worse.
"If it lost another three points, it would have been back where it was before," says Mark Yeandle, author of the report.
So, if Dublin is relying on its favourable corporation tax to attract new financial services entrants (and hence new jobs), is the government tax shake-up due in September likely to affect this?
Chris Sanger, head of tax policy at Ernst & Young, thinks the government is unlikely to jeopardise Dublin's success.
Similarly, John Witing, tax partner at PricewaterhouseCoopers, says that the firms attracted to Ireland by the low corporation tax provide the government with significantly greater revenue through income tax, national insurance and their contribution to the overall economy.
"Low corporation tax is Ireland's shop window," he says. "Raising it would scare away new business."
The government is, however, preparing a range of changes that could see income tax rise to 48% for those earning over €100k, as well as a 2% rise on the 20% bracket. Considering Ireland's notoriously mobile workforce, this could lead to an exodus of talent pursuing opportunities elsewhere.
