If I had the ear of finance minister Brian Lenihan, I’d be telling him not to look a gift horse in the mouth. The British government has this week handed Ireland a gilt-edged opportunity to kick-start the battered IFSC and, with it, the fortunes of thousands of young Irish graduates and workers.
Last Wednesday, the British chancellor, yielding to popular pressure for revenge, announced he would tax the bonuses of high-flying investment bankers. He announced a 50 per cent tax on any bonus over Â£25,000.This, for most mere mortals, would seem nothing to grumble about until you see what the reality is for those bankers.
When you consider that for the 5,000-odd Goldman Sachs employees in London, the average pay – of which bonuses are the most significant proportion – is Â»500,000 a year, you can see how this ‘super-tax’ will make them nervous.
While it’s easy to understand the British government’s motives, particularly as the bankers are unrepentant about their role in last year’s collapse of the global economy, the result is that these bankers will simply look to leave London.
These are the most footloose of all workers; their capital is their contact book and their bank’s balance sheet their armoury. They will move to wherever the feel they can work and make money.
Whether you like them or not, these are an asset that many countries can ill-afford to ignore. That is why Luxembourg, Ireland, Dubai, Singapore and, of course, Switzerland have been trying to make sure that financial services are part of the country’s industrial infrastructure.
The British government has given us an opportunity like the one presented to us when Intel, Microsoft and Pfizer were looking for a place to locate outside the United States in the 1990s.They chose Ireland for tax purposes and for the quality and availability of the workforce.
It was ‘win-win’ for us, as we had no real multinational industry so we got all the benefits; we got jobs we didn’t have before, tax revenue we didn’t have before, and spending we didn’t have before.
Now, quite feasibly, we could do the same again, because investment bankers – the ones which drive the economy of London – are the targets of the Labour government. We could be their port in a storm.
The Minister for Finance should seize the opportunity and get on the phone to the head of Goldman Sachs and JP Morgan and tell them that Dublin welcomes them and is open for their business. God knows we need a bit of luck and now is our chance to grab it. But why would a big investment bank come here to Ireland? Apart from the fact that its senior employees were about to jump ship because of taxation, what other reasons could there be to come here?
First, in a 24-hour trading business, Ireland shares the same time zone as London and therefore acts as a platform to bridge the Asian markets, which open during our evening, and the American markets, which open during our afternoon.
Second, we have a huge oversupply of commercial office space in Dublin. Any incoming bank could get great property deals, which – among other things – could save us putting these properties into Nama. Equally, we have good links to Europe and the US. God knows Aer Lingus needs some regular business passengers. Ryanair would welcome the challenge too.
The IFSC has the technological infrastructure. The same language helps enormously for employees wanting to move here with the minimum of hassle. Third, the 12.5 per cent corporation tax is attractive for a large investment bank.
While our tax rates will rise this year and next, income tax in Britain before the ‘bonus tax’ for bankers will also be high. Fourth, Dublin and Ireland offers international investment bankers a good quality of life, good schools and a government that is not targeting them exclusively. Why wouldn’t they move here?
Let’s look at this from our side of the deal. For us, it looks like a ‘win-win’ outcome. Think about tax alone. In Britain, financial services companies constitute 25 per cent of total corporation tax. This is a figure of Â£11 billion.
This obviously doesn’t include the huge amount of tax the employees of these companies pay in income tax, Vat and stamp duty.
For Ireland, even if we were to poach one of the giant investment banks, the contribution to our faltering tax revenue would be enormous. Equally, as we have seen with pharmaceuticals in Cork, once one big name comes to Ireland, others tend to follow. This is know as clustering in economics and it is easy to see how attracting a huge name like Goldman Sachs to Ireland could begin a process where others copy and move some, if not all, of their operation here.
When I worked in investment banking in London, in the 1990s,the majority of my colleagues were foreign. We worked with non-English clients and most of the deals we did were not in Britain but in Europe and further afield. London really only served to ‘host’ the industry.
Most people I worked with liked London, but if they felt the government there was out to get them they would have moved on just as easily to an adjacent English-speaking jurisdiction that was prepared to open its doors to them.
Even if we attracted 20 per cent of the business – about as much as we could manage now anyway – the positives would be enormous. Just think of the prospects of our own workers who are now waiting in our zombie banks for the horrible but inevitable chat with the boss. Because of the stupidity of their top brass, Irish banks expanded rapidly, fuelled only by an unsustainable increase in property. Now many thousands will be laid off as the banks contract.
Where are they going to go? Where are they going to use their skills, if not in new banks that might come into Ireland? This is the opportunity and the IFSC, with its new Luas link, provides a fantastic and obvious home for these highly-motivated foreign bankers. The more of them we have, the more they will need to employ local people with banking acumen. Off we would go on a virtuous circle. This is our chance to do what Brian Lenihan calls our ‘‘patriotic duty’’.
‘‘England’s difficulty, Ireland’s opportunity’’ – wasn’t that what the forefathers of Fianna FÃ¡il used to say?
After all, if the British government is prepared to entice our shoppers to Sainsburys in Newry, then we should be prepared to poach their bankers for the IFSC in Dublin.
“After all, if the British government is prepared to entice our shoppers to Sainsburys in Newry, then we should be prepared to poach their bankers for the IFSC in Dublin.” David, I have grave reservations concerning your suggestions to entice bankers to Dublin. I will leave it to someone else to raise the issue of DEPFA bank which had its “headquarters” in the IFSC, or even to suggest that Ireland should entice drug cartels to set up their European bases in Dublin. I suspect however that the “barons” of Sao Paulo and other exotic locations are already sending emissaries to… Read more »
I haven’t heard anyone in government discussing job creation for years. They are too busy trying to put positive spin on tax-increases and welfare cuts.
Good idea David, but if we are going to invite the British Banks in I suggest we rename the IFSC to Pirates cove.
Sorry to say but I do not agree that this would be a good move for our financial difficulties
Inviting Goldman Sacks to set up shop in this country after the chaos they inflicted in the US
We have enough corrupt bankers in this country without inviting anymore
anyway for this to work we would need honest government in place and judging from the latest outbursts in the Dail we still have foul mouthed gurrieres running the shop!
Cracked idea that describes exactly why it would be so transient. If London came under any significan t attack, the UK would U-Turn.
Banking is a utility. We do not need these clowns with their archaic ideas. They are gamblers – nothing else. Far better and more honest to open big casinos here instead.
It seems strange that you are using your Sunday column to effectively invite more bankers into the wild west of European finance – i.e. Dublin – especially after only 4 days after the recent budget.
Is there not something wrong with Ireland taxing bankers bonuses????? Oh sorry, I forgot, FF are in power – the Party who like to do Robin Hood in reverse . . . . . Steal from the poor to provide for the rich.!!!!
ridiculous idea and as wackey as much what you now say , just to have an excsue to put pen to paper and take undeserved fees
Instead you should write about how the Greens have sided with a Government in bed with seedy property speculators and possible if you read the latest Un report questionable drug dealings ! as mcuh of this black economy cash caught up i dubious developmentst should all be investigated re source of funding !
David’s lost his mojo. We want to kick out all the corrupt banksters and stop their ponzi scheme cold. We need to invest in silver and we have billions worth of gold in the country in counties like Monaghan just waiting to be extracted and smelted into bullion. Hoard as much gold and silver as possible. Silver is dirt cheap right now compared to the price it will reach in the coming decade. It is rarer above ground than gold by a ratio of 6:10, once enough ppl realise this the price will shoot up due to the laws of… Read more »
Golden sachs in alignment with AIG are the architects behind the financial fraud mortgage insurance which made possible skyscraper leveraged banking loans and caused the global credit bubble which destroyed the irish economy and you recommend BL seduce s them into using ireland as safe haven.
You’ve obviously just popped your own PR bubble and de throned any misconceptions anyone out there maybe suffering from.
Good for you.
Disagree with article, completely.
You are either a hypocrite, a dadaist or
David, I’m afraid I have to disagree very strongly with your premise, here. Rather than giving these banksters a tax-haven, we should follow-suit and copy the Brittish government and extort a drachonian tax from our own banks. That way, they have nowhere to hide (if other countries follow), as they gamble with real people’s livelihoods. Your proposal feels a little like prostitution, to be honest. People who operate as these bankers do have ruined the world economy, ruined our country’s economy for at least two generations and we already have too many of them here. Let’s not invite more. Where… Read more »
David: It doesn’t affect your proposal much but you ought to have made clear that it is the employing banks that have to pay the 50% levy, not the financial whiz kids. When I hear about these large bonuses I sometimes wonder what is the purpose of them and why are they considered so essential to the smooth running of the financial system. I have absolutely no reason to suppose that every penny is not immediately salted away in a Cayman Islands account. After all, there are only so many apartments, Porsches and yachts that a person can yearn for.… Read more »
Malcolm McClure, so true!
“I have absolutely no reason to suppose that every penny is not immediately salted away in a Cayman Islands account. After all, there are only so many apartments, Porsches and yachts that a person can yearn for.”
I am convinced that, whatever it is that we need on this island right now, it is definitely not more of these people.
I think it is this, though:
Folks, before I got distracted by Malcolm’s excellent post, I intended to give this link on the budget:
Counter-intuitive. Wildly unpopular. But there’s no doubt it would be a stiff shot in the arm. Mind you it’s possible the patient may have a massive cardiac arrest down the line. But there’s not much else to do. I think we’ve had enough of a shake up to ensure we carry through on rooting out the systemic political and commercial corruption and mindlessness, and properly improving our productivity and competitiveness in qualitative terms (coming away from the middle men and land dealings and overcharging for rubbish etc.). As long as we continue this work in tandem, why not take this… Read more »
Hello all. Must disagree with practically all the comments so far on this article. Ok, David’s idea is, at first glance, unpalatable, but given this countries current impasse we have little choice but to seize whatever opportunity may come our way. Our public finances are in crisis, and they will probably continue to deteriorate in the short to medium term. The public purse needs a shot in the arm, and if there is a chance to attract 5,000 very highly paid workers to the country then we should take it. We may not agree with their methods, or even their… Read more »
Alister Darling’s decision to tax the bankers bonuses was a politcial decision in an election year in which Labour are likely to relinquish power – if, as expected, the Tories win the election in May/June you can rest assured that they will reverse this bonus ‘super tax’ law if it risks some kind of mass exodus from The City in London to Dublin – I just can’t see that happening on a grand scale to which david eludes
I’m with David on this one. – the nay-sayers say that they don’t want investment banks in Ireland because we will have to bail them out – with proper [enforced] regulation we wouldn’t. – they would employ a lot of people/graduates, and their expenditure would also create a lot of jobs [sure they won’t spend all of their wages/bonus, but who in their right mind does] – too much focus on GS. David uses GS as an example of the type of bank to attract. GS didn’t invent the subprime assest and they actually got rid of most of their… Read more »
As Willem Buiter, who is now the Chief Economist of Citigroup, wrote on his Mavericon blog: ‘Financial crises may not be the best time to make friends and influence people, but the Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging.’ http://blogs.ft.com/maverecon/2008/10/the-irish-solution-unlawful-beggar-thy-neighbour-and-short-sighted-but-apart-from-that-ok/ In this current article David entreats that “this is our chance to do what Brian Lenihan calls ‘our patriotic duty'”. Er, isn’t that what you said about The Guarantee? I challenged you then on narrow protectionism, short-term economic ‘nationalism’. It’s effortlessly easy to challenge you again now.… Read more »
Why can’t these investors be allowed fail if they lose. Not like the winners of the celtic tiger are complaining that they unfairly earned too much.
I’m afraid the majority of this nation are ignorant, greedy and leading us all down a path of self destruction
When will enough of us figure out that Fiat money is a disaster because its all too easy for governments and central banks to print and invent as much money as they like. It distorts the marketplace and leads exposed who believed they were economically safe.
Wills, People will always try to screw others over, not saying everyone is like that but there is a certain percentage. Its in some people’s nature and those good natured don’t understand why the bad bastards do where they do, which is to steal, rape, pillage, murder. Its the whole dove vs eagle theory. Imagine a tribal group of doves aka altruistic members and eagles aka thieves, rapists, murderers. Too many doves and one eagle can take out the entire village. Another thing is, I believe only a small percentage are leaders. The rest are sheeple who can’t think for… Read more »
Sean_Kelly, looks good!
Let’s keep at it!
David – first sensible article you’ve written in a while… which is why the cohort of nutters and woolly left-wingers that patrol your comments disapprove. Meanwhile, the Swiss have already preempted you.
Hi David, I agree that little old Ireland could try and attract financial businesses as well as their workers to Ireland, but we are already doing that. Depfa being a case point and corporation tax being the driver. However, London has been competing as a global financial centre for a lot longer than us here in Dublin (its a pity our decentralisation policy didnt pick Ballydehob but there you go, all roads lead to Rome). Whilst such a tax move in the UK may seem draconian, businesses will adjust their pay strategy accordingly to maximise pay staff and retain staff.… Read more »
This is precisely the thinking that has led the world to ruin. Yet another effort to give these guys a ‘safe low tax haven’, we can hardly complain then when Poland attracts away jobs from Limerick, or MNC’s relocate to Thailand, this is all part of the same corrupt game, the race downwards. Instead, if the governments of the world could find the political will and introduce legislation that would regulate the banksters and place major blocks on speculative capital, and capital flights, in South Korea ‘business people’ were threatened with the death penalty if they moved capital abroad, according… Read more »
I wrote my post above before I read the comments of others. For once I had time and I read them all – so nteresting then to read many similar thoughts such as drugs, prostitution, mobility, London competing, etc, etc, such as in comments from Ruari, AndrewG and Tim plus others. I do think that David article was concentrating on ghe job creation aspect rather than on us being a cosy location for a nefarious sector. I cant remember who posted it but it is true that few sectors are squeaky clean, even if they wear white coats such as… Read more »
The Brits put their faith in financial services 30 years ago and look @ the mess they are in.Sterling is a jelly currency, the cost of housing in the south of the UK is beyond almost everybody and propping up Fred Godwin and his ilk is costing hundreds of billions.Seanie and Fingers mark 2 are the last thing Ireland needs.The channel Islands /Isle of Man are welcome to these parasites.Rubbish article.You Mr Mc are slipping.
Here is an update on the Greek Tragedy. http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6804156/Greece-defies-Europe-as-EMU-crisis-turns-deadly-serious.html Greece is stuck between an Acropolis and a hard place. The Greek standard of living, is (to paraphrase Dick Cheny), not up for negotiation. This will infuriate Frankfurt, Paris, Amsterdam, Brussels. Interestingly enough, once again we have to rely on a news media organization on another country to tell us that financial institutions based in Ireland are exposed to the Greek state bond debacle. This reminds me of the Depfa scandal, when the German media was telling the German citizens about what was happening. And at the same time The Irish… Read more »
David Intersting article. I know of accountants who are packing shelves in supermarkets. I know of solicitors who are so desperate for work that they are stopping Eastern Europeans on the street and at Dublin Airport, promising them money if they bring cases against their employers. I even heard of a former bank manager collecting shopping trolleys in a supermarket car park. Auctioneers are doing nothing. And they are inately skilled at selling a ‘pig in a poke’ scenarios which make them perfect for financial services. The skilled professionals at the top of the ladder in London are worth a… Read more »
Woooooow , David you must have had one too many beers in Kilkenny on Friday , as You must be Joking ,….Invite these useless gambling clowns over here , they have wrecked the entire system and you want to bring more of them here . London is falling apart , let it !. The Monetary system as we know it is falling apart , let it ! Now Governmental debts are been tested and you want these guys to bring their Families over too so they can infest our schools , forget it !. This is Not the Economic road… Read more »
I want you to look a the photograph in the attached link…..and observe the number of lorries in the traffic bound north for the border. http://www.independent.ie/national-news/christmas-chill-in-border-counties-1973166.html Not only are the retail sector in Leinster inable to to compete with retail North of the border, but it appears that the ports in the East coast are also incapable of competing with the ports of Warrenpoint and Larne. This picture was intended to show us the trail of traffic going north in the morning through Co.Louth. However there is also a serious problem with respect to competitiveness of our ports sector. If… Read more »
The worst thing about the tax-cutting race to the bottom is that it reinforces the Irish mentality that we can only succeed by diverting other people’s wealth in our direction. This wealth was created by other people’s brain-power and labour but we fool ourselves that we are one of the world’s greatest exporters of software, pharmaceuticals etc.. This is just another form of the cute-hoorism and gombeenism that got the country to where it is today. FDI by multinationals was originally a good idea to kick-start the economy, but we should have moved beyond that stage of dependency by now.… Read more »
The more I reads this article the more sick it makes me feel,..
Dont be sick Wills, sit down and enjoy a new movie.
A MonkÂ°s Purse – We are in the Age of Aquarius where speed and wind communicate faster than before and this progression will increase as times passes. Round Towers were built by the monks to protect their intellectual property and we should repeat that process to build and create wealth. I am proposing that – castled in wall round tower – free zone area should be initiated that has no allegiance to country or foe and has the freedom to do only one thing and that is – make money under any rules it wishes and with low taxes. Then… Read more »
Wills, Andrew G Mooeny, you will both enjoy this snippet from today’s Daily reckoning; perhaps you have read it already http://www.thedailyreckoning.com (the newsletter predates the website content): – “It’s open season on bankers. But the hunters are shooting blanks! First, Britain said it would impose a 50% super-tax on their bonuses. Then, Sarkozy said he would do the same thing. Angela Merkel merely said that she found the idea ‘charming.’ As for the US, the argument goes on. Goldman has tried to head it off with various gestures. Its top man said the firm wasn’t just trying to make money;… Read more »
And Wills, more of same, re AIG and Goldman: – the link is here http://www.dailyreckoning.co.uk/emerging-market-investment/bankers-bonuses-emerging-markets-24111.html “The Financial Times calls it a “war on greed.” But it’s a bogus war. What is really going on is that both sides are conspiring to share money that doesn’t belong to them. The Wall Street Journal, for example, revealed more of the real dealings between AIG and Goldman. AIG had guaranteed billions worth of Goldman’s dodgy mortgage deals. If AIG went down, Goldman would lose a lot of money. So, when the feds stepped in to “save western civilization as we know it,” they… Read more »
This so called ‘chance’ may not be so golden http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims The fundamental questions must be asked: Who are we as a people? Are we simply fumbling in the global greasy till with very dubious characters? Is everything our forefathers struggled for to be reduced to ‘virtual transactions’ which benefit a few to the detriment of the many? Are we intent on building an economy or a society which cherishes its people and looks after those who for whatever reason need a helping hand? Are we champions of profit or people? Market fundamentalists or decent human beings? Are we chasing the… Read more »
Schiff explains it all brilliantly. Its really simple
Folks, ok; knowing what ire I will receive from “certain quarters” after posting this and nothwithstanding the fact that all FF members receive these emails, not just me, here is my terse reply to (supposedly – though I know he didn’t type it) An Taoiseach’s email to me (it’s underneathe my reply). I just think that you deserve to read what is sent to all FF members. Here it is: No, Brian; this budget will not help the economy – it will accelerate the deflationary spiral that you set in motion last year. This budget is not “difficult for everyone”,… Read more »
Folks, the email I received today, purporting to be from Brian Cowen (and my reply) are “awaiting moderation” for some reason.
I don’t know if you will get to read them, as Ronan may decide not to publish or, since ther will be another article on Wednesday, you may by-pass it.
However, I have tried to let you know what is sent to all FF members.
Every bit of foreign investment that brings jobs ,and tax revenue is to be welcomed .
Allez Les Bleu:
Sarkozy has capped salaries of French Bankers too .Why was D selective in attracting only British Bankers?
A Wheelie Bin : In another Time when wealth and transfer technology including printing money in gold were been robbed The Monks decided to castlelise their production units and in doing so protected their future wealth production.They did this by creating round towers with a high out of reach entry point.We need to learn from this and I believe this what D has in mind. Should a new concept of Soverign Principality Protected Gold Zones be created in strategic locations with their own laws and independent Financial Regulations ( or lack of it to be precise) we can tolerate the… Read more »
Morning all, David here; First, thanks for all the comments. I can see that this idea has caused some consternation. Well indignation ain’t going to get us out of this mess and a well regulated, proper investment banking industry is an industry worth having. In fact, it is highly likely with global imbalances such as they are, (by this I mean the global current account imbalances), international banking and the movement of money around the globe from countries that don’t want to spend it – the surplus countries (China, Germany, The Gulf and Japan) to countries that do want the… Read more »
Hi David, I too live in hope and agree that “red light districting” for financial services is not the way to go. You mention that we could do it with better regulation, etc, but dont the financial businesses go to places where regulation is ‘light’? Isnt that why many of them are in London in the first place, because the City is let get on with its “work” as long as they pay their taxes, etc. The Russian Oligarchs and many other russian/ukrainian businesses were flooding into London, etc, and the reason why? It is a good place to do… Read more »
If Goldman Sachs, JP Morgan and God knows who else set up shop here, thousands of unemployed people would hand in their CV’s straight away, and they’d be right. What a number ; even if you make a pigs ear of things, you’ll be bailed out. Now that’s what I call job stability. Beggars can’t be choosers. People have mortgages to pay, and mouths to feed. I’ve never met the person yet who, if they are truly backed up against the wall, won’t compromise their principles. Though reading through the posts here, some of the posters on this site think… Read more »
Hi David, I’m enjoying reading follow the money at the moment. Its always great to get some feedback from yourself on the forum, so please keep it up. I’m out of work for nearly 2 months now, little prospect of finding anything, so I understand your desire to get people back to work, even with investment banks. You know the damage unemployment can do to a good man – written so well in your book, and I salute you in your efforts to end the misery many people here are experiencing. Would I be right in assuming the people here… Read more »
Well the idea would be ok in the short term, but they would not be “new jobs” since presumably 500k+ per year earning bankers would be imported along with the jobs, and the tax intake would not only be favourable to them rather than us, they’d be off like a short to the next country to offer a yet smaller rate and even more of a wild west regulatory regime. I think its called the “race to the bottom.” What we do need, however, is some kind of emphasis on job creation and maintenance, rather than wage cutting and job… Read more »
Mary Robinson in Copenhagen: http://www.euractiv.com/en/climate-change/robinson-lack-climate-deal-spark-civil-unrest/article-188303# There have been days of protests in Copenhagen by well-meaning activists who do not accept that Carbon Credits trading will alleviate the poverty in the third world. These have been roughly broken up by the police, culminating last night in a police raid on a meeting of the Climate Justice Action party. This was done with water cannon, tear-gas and motorbike raids on the commune of Christiania. The CJA suggest alternatives ‘that provide “real and just” solutions: leaving fossil fuels in the ground; reasserting peoples’ and community control over resources; relocalising food production; massively reducing… Read more »