Another reason Ireland may lose financial services jobs

Overly-punitive income tax could drive away financial services talent in Ireland, and if Brian Lenihan hikes it further in next week's budget, expect something of a mini-exodus from the IFSC in the near future.

Over the last 18 months, the marginal rate of tax has jumped from less than 44% to over 52%, and there's a real chance it could rise to 58% in 2010, suggests Brendan Kelly, director of Financial Services Ireland (FSI).

If this happens, don't expect international financial services talent to stick around, he says.

"It is not unusual in the IFSC for one or two highly skilled asset managers, risk managers, or fund managers to be the anchor that keeps a team of 40-50 people in Dublin," he says. "If he or she decides to leave - the rest go too. Increasingly, penal tax rates are making Ireland an unattractive location for these key people."

Ireland's low corporation tax has long-been an attraction for international financial services firms to base themselves in Dublin. But, if these firms can't persuade key executives to relocate, this influx could also be threatened.

Enda Faughnan, head of tax financial services at PricewaterhouseCoopers in Ireland, says: "There's no question the high marginal rates are a threat to Ireland's international competitiveness. We'll struggle to attract key executives, who are important to bringing new business into Ireland."

The damaging effect of hiking up income tax is currently in evidence in the UK. In April, the highest band of income tax will rise to 50%, and financial services professionals, particularly hedge funds, are already moving to more tax-friendly countries.