England’s difficulty is…

David McWilliams sees an opportunity to expand the IFSC

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 £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 »500,000 a year, you can see how this ‘super-tax’ will make them nervous.

While FF & the Greens cut social welfare Labour are targeting the investment bankers, perhaps creating an opportunity to attract some big fish to Ireland..

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.

He highlights the advantages for them – English speaking, same time zone, lower tax both income and corporation, good schools, new transport infrastructure in the IFSC and the mobile nature of workers in the financial sector. So what’s in it for us?

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 £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.

So what do you think UK, our shoppers for your investment bankers, good deal?

Update: Telegraph reports on investment bankers planning to leave the city.