International Financial Services Centre, Dublin

thumb|right|IFSC House - the former offices of [[Allied Irish Bank|AIB (IFSC, Custom House Quay, Dublin 1)]]

thumb|[[Central Bank of Ireland headquarters with the foundations of Salesforce new Dublin office and the MV Cill Airne in the foreground (Spencer Dock, North Wall Quay, Dublin 1)]]

The International Financial Services Centre (IFSC; ) is an area of central Dublin and part of the CBD established in the 1980s as an urban regeneration area and special economic zone (SEZ) on the derelict state-owned former port authority lands of the reclaimed North Wall and George's Dock areas of the Dublin Docklands. The term has become a metonym for the Irish financial services industry as well as being used as an address and still being classified as an SEZ.

It officially began in 1987 as an SEZ on an docklands site in central Dublin, with EU approval to apply a 10% corporate tax rate for "designated financial services activities". Following a period of successful regeneration the Section 23 Relief and other schemes ceased accepting new entrants from 1999.

The original 11-hectare IFSC site has gone through several expansions to become a area by 2018 which is now a major European financial centre. By merging with the Spencer Dock and Grand Canal Dock area, the IFSC is now considered to be an "International Services Centre", covering a broader range than being purely financial.

thumb|IFSC 4.8-hectare expansion site under construction (January 1998)

East of Commons Street is the later IFSC 2 expansion (development of an additional from 1997 to 2007 under the Dublin Docklands Development Authority (DDDA) which runs along North Wall Quay and Lower Mayor Street. It is an integrated development located in the centre of the city which incorporates office accommodation, educational institutions, housing, restaurants and shopping facilities including the Dublin Landings development. Only the area within the North Wall part of the original IFSC includes IFSC as part of a postal address.

History

The concept of a low tax international financial service centre is attributed to Irish businessman Dermot Desmond and politician Ruairi Quinn among others, whose ideas were later picked up by Fianna Fáil leader Charles Haughey and incorporated into his 1987 election manifesto (with contributions from AIB CEO Michael Buckley). Despite resistance from the Department of Finance (concerned about the impact on domestic tax revenues), Haughey overruled and got permission from the EU to create a special 10% tax incentive zone (the IFSC), in the 1987 Finance Act (Section 30).

The CHDDA had earlier been created under the auspices of the Garret FitzGerald lead Fine Gael-Labour minority government as a Special Purpose Agency (SPA) in November 1986. The physical manifestation of the IFSC began with the construction of three offices - The International Centre, IFSC House and La Touche House, all with distinctive green colouring. To operate in the IFSC and access the 10% tax rate, companies had to be approved by the Certification Advisory Committee (CAC), composed of representatives from the Irish Development Authority, the Department of Finance, the Department of Enterprise, Trade and Employment and the Central Bank of Ireland.

The next major event was the Irish Taxes and Consolidated Act, 1997 (TCA) which upgraded the legal and tax structures in the IFSC, and in particular created the " Irish section 110 SPV" and laid the foundations for the Double Irish, Single Malt and the Capital Allowances for Intangible Assets BEPS tools. In addition, the Dublin Docklands Development Authority was set up to oversee the expansion of the IFSC's site (most notable being the reclamation of the Grand Canal Basin site)

The "dual structure" Irish corporate tax rate, came under pressure from the EC (due to competition rules), and it was agreed that it would expire in 2005. In advance of this deadline, the Irish Government in the 1998/1999 Finance Acts introduced a lower 12.5% corporate tax rate for the entire country which was fully introduced from 1 January 2003, and by 1 January 2006, all remaining IFSC companies (some held their old licenses) were on a 12.5% rate. The IFSC ceased to exist as a required legal entity.

The next major event was the Irish financial crisis from 2008 to 2013. The IFSC was a major EU securitisation hub and the effect of billion euro special purpose vehicles (or SPVs) collapsing added to the concern over Ireland's financial position. It did not help that these SPVs (and other IFSC type activities) produced a further distorted picture of Ireland's already precarious National Accounts statistics. The sudden drop in Dublin's ranking on the Global Financial Centres Index ("GFCI") from an all-time high of 10th in March 2009 (GFCI 5), to 23rd by September 2009 (GFCI 6), sparked a formal investigation.

A tightening by the Irish regulator (after a period of loose regulation) which followed the Irish financial crisis led some financial institutions to move operations elsewhere (as well as others who were exited) and caused Dublin's GFCI ranking as a financial services centre to drop further to 70th in 2014 (GFI 16). IFSC institutions cited the timeliness of decisions by the Central Bank of Ireland as having an impact on their operations. Since 2014 however, the IFSC has started to recover, rising to 31 in the 2016 GCFI 21 ranking.

The IFSC Securitisation Sector produced a major domestic scandal when it was revealed in mid-2016 that US Distressed Debt funds (pejoratively called "vulture funds") had been using the Irish Section 110 SPV to avoid all Irish taxes on their Irish domestic investments. The Irish Government closed the "loopholes" but it was estimated that the loss in Irish tax revenues to the Irish exchequer runs to billions of euros (exceeding the value the securitisation sector ever delivered to Ireland). Discussed further in vulture fund Irish tax avoidance.

The IFSC Securitisation Sector was further pressured when it was revealed in 2018 that Russian banks (some under EU and US sanctions) had also been using the Irish Section 110 SPV to funnel over €100bn through the IFSC. Further academic studies showed that the IFSC SPV sector was operating in an almost unregulated fashion where structures were more akin to brass plate companies. Other former Central Bank of Ireland regulators also publicly highlighted their concerns. Discussed further in unregulated shadow banking.

Financial sectors

A 2015 Irish Government IFS 2020 Strategy Paper, lists the Irish financial services sector as comprising over 400 companies, employing over 35,000 people (one third outside Dublin), with over €3.2 trillion in funds under administration, providing €2bn in taxes and €2.3bn in wages and salaries. KMPG estimate the IFSC constitutes 7% of Irish GDP. The IFSC has now become one of Europe's most important centres for , and , and ultimately became the birthplace of and global leader in .

Some of the largest offices in the IFSC are those of the major Irish accounting and law firms. The four largest global fund administration and custody providers all have major offices in the IFSC State Street, BNY Mellon, Citibank and Northern Trust, as well as internal fund administration departments from major global investment banks such as JPMorgan Chase, Goldman Sachs and Bank of America.

Fund domiciling (and distribution) is where specialist law firms, and specialist administration departments of investment firms (i.e. BlackRock, Citibank, Deutsche Bank), provide legal (i.e. creating fund prospectus, fund listing documents etc.) and other professional services (i.e. fund trustees, fund audit etc.) to Irish domiciled, and often Irish listed, fund structures in various Irish legal fund "wrappers" (incl. UCITs, QIAIFs, MMFs and AIFs). The IFSC is one of the largest and fastest growing locations for UCITS in Europe.

The trade body for the IFSC fund administration and domiciling sector is the Irish Funds (Industry) Association (previously Dublin Funds Industry Association, or "DIMA").

Securitisation

thumb|260px|Irish Debt Securities Association (IDSA) launch in 2013 with Minister [[Richard Bruton, IDSA CEO Gary Palmer, and IDSA Chairman Turlough Galvin of Matheson's Tax Practice]]

The introduction of the Irish Section 110 SPV in 1997, described by PwC as the "heart of the Irish structured finance regime", enabled the IFSC become the largest provider of SPVs in the EU securitisation market, and has made Ireland the 4th largest shadow banking centre in the world. While Irish securitisation SPVs pay no effective Irish corporate taxes (SPVs are deliberately structured in this way), they are estimated to contribute over €100m annually to the Irish Economy from fees paid to local Irish professional services firms (legal, accounting and corporate services providers) who create and administer the SPVs. The sector was involved in a major domestic tax scandal in 2017.

Sometimes the securitisation sector is merged with the fund administration sector when "total funds administered" data is quoted for the IFSC (or IFS sector).

The trade body for the IFSC Securitisation sector is the Irish Debt Securities Association (IDSA), which was founded by IFSC law firm, Matheson.

Banking

Some of the world's largest banks have offices in the IFSC. Their focus is mainly on administration support for securitisation and structured finance activities, aircraft leasing activities, or conducting in-house corporate treasury and fund administration functions for their parent. There are few examples of foreign banks conducting higher margin asset management, investment banking or corporate finance from their IFSC platform (instead usually favouring their bases in London, Paris, Frankfurt or Luxembourg in Europe).

The trade body for the IFSC and non-IFSC banking sector is the Irish Banking Federation.

Insurance

The main insurance activities cover life insurance, general insurance, reinsurance and captive insurance. There is little insurance risk originated or underwritten in the IFSC and London remains the primary global base for these activities. The only remaining listed Irish insurance company is FBD Holdings which is one of the smaller players in the Irish insurance market. The IFSC occasionally provides an accounting and administration service for products sold on a pan-EU basis through the parent's main channels. The IFSC has a niche strength as a top location in the relatively small Captive Insurance market. Unlike some other IFSC sectors, the Aircraft Leasing sector includes high margin activities such as origination and financing as well as accounting and administration. While the sector employs around 5,000 people (1,700 directly) (versus Fund Administration at almost 10,000 jobs), and pays less than €40m in Irish corporate tax it is estimated to provide over €500m annually to the Irish Economy (from salaries and fees) making it one of the most valuable sectors in the IFSC. In May 2019, figures from the Department of Finance showed that since 2012, the net assets of the aircraft leasing industry in Ireland was close to zero (€141 billion in Irish domiciled aircraft assets offset by €141 billion in offshore financing); and that the aircraft leasing industry paid only €54 million in Irish corporation tax in 2018. The average salary of employees in the aircraft leasing sector is estimate to be in the region of €165,000. Carlyle Group and Oaktree Capital Management. Additionally, investments and acquisitions are also made by non-domestic firms such as Brookfield Asset Management's €120M takeover of Imagine Communications, Insight Partner's purchase of a €100m stake in the AMCS Group (in conjunction with the ISIF) and Apollo's takeover of Ireland's largest hotel chain Tifco in a €600m deal in 2018.

Domestic private equity firms include Renatus and most notably Causeway Capital who were responsible for the rescue of Patisserie Valerie in February 2019.

The trade body for the private equity and venture capital industry is the Irish Venture Capital Association (IVCA).

Technology expansion

thumb|Apple's Q1 2015 Irish restructuring ([[leprechaun economics) is the largest BEPS action in history, and led to the replacement of GDP by GNI*.<br />Brad Setser & Cole Frank (CoFR).]]

The 2015 IFSC III phase saw the "financial" IFSC merge with the neighbouring Grand Canal Dock and Dublin Docklands areas; comprising major offices of global technology multinationals including Google, Facebook, and Amazon. Since the 2015 expansion, the term "International Services Centre" (ISC) is sometimes used.

Some of the biggest offices in the IFSC are the law firms (e.g. Matheson, A&L Goodbody, McCann Fitzgerald, and William Fry), and accounting firms (e.g. PwC, KPMG, Deloitte, and EY), who advise both the financial multinationals and technology multinationals, operating in the Greater Dublin Area.

The legal structures created by IFSC law and accounting firms for securitization (e.g. Section 110 SPVs, and QIAIFs), became important to the tax structuring of US technology firms in the IFSC. PwC Ireland managing partner, Feargal O'Rourke, was credited as creating the Double Irish BEPS tool, In 2018, the European Parliament GUE/NGL group called the CAIA tool, the "Green Jersey" BEPS tool.

The CAIA BEPS tool requires multinationals to create virtual internal intellectual property (IP) assets in offshore locations (e.g. Apple used Jersey). These virtual IP assets are purchased, via intergroup loans, by the Irish subsidiary. The CAIA tool allows the Irish subsidiary to write-off this intergroup purchase against future Irish taxes. An internationally reputable accounting firm is needed to stand over the "valuation" of the virtual group IP asset in the multinational's GAAP accounts.

Global ranking

GFCI ranking (2007–2019)

The IFSC, classed as "Dublin", appears in the Global Financial Centres Index (GFCI), a ranking of the competitiveness of over 100 global financial centres based on over 29,000 financial centre assessments from an online questionnaire together with over 100 indices from organisations such as the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the Economist Intelligence Unit. The index was started in 2007 and is published twice a year; the IFSC (or Dublin) reached a high of ninth in GFCI6, and a low of 73rd in GFCI16.

{| class="wikitable sortable" style="text-align:left"

|+ style="text-align: left;" |Global Financial Centres Index ranking (2007–2019)

!style="text-align:left"|GFCI Survey

!style="text-align:left"|GFCI Survey Date

!style="text-align:left"|Dublin Ranking

!style="text-align:left"|Total Cities

!style="text-align:left"|Dublin Score

| GFCI1 || March 2007 || 21 || || 578

| GFCI2 || September 2007 || 15 || || 605

| GFCI3 || March 2008 || 13 || || 613

| GFCI4 || September 2008 || 13 || || 613

| GFCI5 || March 2009 || 13 || || 622

| GFCI6 || September 2009 || 9 || || 618

| GFCI7 || March 2010 || 31 || || 612

| GFCI8 || September 2010 || 29 || || 605

| GFCI9 || March 2011 || 33 || || 592

| GFCI10 || September 2011 || 43 || || 614

| GFCI11 || March 2012 || 46 || || 621

| GFCI12 || September 2012 || 49 || || 618

| GFCI13 || March 2013 || 56 || || 627

| GFCI14 || September 2013 || 56 || 80 || 616

| GFCI16 || September 2014 || 73 || || 607

| GFCI17 || March 2015 || 54 || || 627

| GFCI18 || September 2015 || 48 || 84 || 654

| GFCI19 || March 2016 || 40 || 86 || 643

| GFCI20 || September 2016 || 31 || 87 || 663

| GFCI21 || March 2017 || 33 || 88 || 663

| GFCI22 || September 2017 || 30 || 92 || 672

| GFCI23 || March 2018 || 31 || 96 || 666

| GFCI24 || September 2018 || 37 || 100 || 652

| GFCI25 || March 2019 || 38 || 102 || 658

| GFCI26 || September 2019 || 38 || 114 || 674

Xinhua–Dow Jones Index (2010–2014)

The Xinhua–Dow Jones International Financial Centers Development Index (IFCD) was a ranking of circa 45 major global financial centres, and was compiled annually by the Xinhua News Agency of China with the Chicago Mercantile Exchange and Dow Jones & Company of the United States from 2010 to 2014; the IFSC (or Dublin) ranked 37th overall of 45 centres in the final 2014 IFCD Index.

Tax haven concerns

thumb|A 2017 study in [[Nature (journal)|Nature showed the IFSC was one of the world's largest Global Conduit OFCs, in facilitating corporate tax avoidance.]]

IFSC growth is closely related to concern regarding tax issues, and Ireland as a tax haven, estimated in 2018 by academics to be the world's largest tax haven. The role that the major IFSC accounting and IFSC law firms have played in creating Irish tax haven-type legal structures, including Double Irish, Single malt, and Capital allowances for intangible assets (CAIA) BEPS tools, as well as Section 110 SPV, QIAIF and ICAV zero-tax legal structures, has been chronicled.

For example, PwC Ireland, one of the largest professional services firms in the IFSC, was identified in 2013 by Bloomberg as the "great architect" of the Double Irish arrangement, the largest known legal tax avoidance structure in history, responsible shielding over US$100 billion annually from taxation.

In addition, Matheson, who state that they have the largest corporate tax group of all IFSC law firms, was identified in 2013 by the Wall Street Journal as the headquarters of 125 major US multi-nationals seeking to benefit from the Irish tax system, and avoid US corporate taxes.

The IFSC's reputation as a global centre of tax haven activities, has seen several of the "offshore magic circle" law firms set up in offices in the IFSC.

IFSC firms have also been associated with helping foreign firms avoid Irish taxes on Irish assets. In 2016, it was discovered US distressed debt funds used IFSC Section 110 securitization vehicles to avoid Irish taxes on their Irish investments (see vulture fund Irish tax avoidance), supported by IFSC law and accounting firms, It was estimated these US distressed funds would avoid €20 billion in Irish taxes from 2016 to 2026 on circa €40 billion of Irish investments made from 2012 to 2016 (which represented circa €80 billion in headline Irish loan balances). Matheson was exposed as using children's charities to hide their client's Section 110 SPVs.

The IFSC's growth has led to Ireland's rise in global league tables of tax havens,

There is evidence IFSC SPVs are used for circumvention of global sanctions, tax avoidance, and money laundering.

Research in 2017–2018 by Trinity College Dublin finance Professor Jim Stewart, and Cillian Doyle, showed many IFSC SPVs are unregulated brass plate structures attracting little oversight by the Revenue Commissioners or Central Bank of Ireland, and with local individuals holding hundreds of SPV directorships. The International Monetary Fund ("IMF") has noted the same concern regarding governance of IFSC SPVs (and FCVs). In 2018, a former Deputy Governor of the Central Bank of Ireland stated that the risks from abuses of IFSC SPVs was not fully appreciated by the Irish Government.

Notable IFSC corporate offices

Fund Administration and Custodial Services

State Street Corporation
BNY Mellon
Citibank
Northern Trust
Bank of America
JPMorgan Chase
US Bancorp

Banking & Insurance

HSBC
AIG
BNP Paribas
Wells Fargo

Investment Banking

Davy Group
Goodbody Stockbrokers
Cantor Fitzgerald

Aviation and Aircraft Leasing

AerCap
Avolon
GECAS
SMBC Aviation Capital
Irelandia Investments - (developer of low cost carriers including Ryanair, Tiger Airways and VivaColombia

Trading

Citadel LLC
Susquehanna International Group
Credit Suisse
Investment Technology Group (Acquired by Virtu Financial)
Ion Trading Group (Fidessa, Dealogic and Acuris)
Corvil (acquired by Pico)
Geneva Trading

Fintech and Regtech

First Derivatives
Fenergo
TransferMate - part of the Taxback Group
Fexco incorporating a majority shareholding in Goodbody Stockbrokers
CurrencyFair
Stripe

Managed Futures

Abbey Capital

Family Offices

Elkstone Capital - various HNWI
Island Capital - Denis O'Brien family office
International Investment & Underwriting (IIU) - Dermot Desmond family office

Private Credit

Guggenheim Partners
Blackstone (GSO Capital Partners) - acquired Harbourmaster Capital Partners
GoldenTree Asset Management
Atlantic Capital Management
Bain Capital

Private Equity

KKR (formerly Avoca Capital)
Carlyle Cardinal Ireland (CCI)
Causeway Capital
Lioncourt

Venture Capital

Draper Espirit

Supermancos - in order of AUM(€bn)

Carne Global Fund Managers
Northern Trust Fund Services
Goodbody Stockbrokers Fund Management
Link Fund Manager Solutions
Davy Group Investment Fund Services
DMS Investment Management Services
KBA Consulting
MPMF Fund Management (part of the Maples Group)