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Financial Services Ireland (FSI), the IBEC group that represents the Irish financial services industry, today urged the Minister for Finance Brian Lenihan not to increase income taxes in next week’s Budget.

Brendan Kelly, Director of FSI was speaking following the group's Annual Dinner at the Shelbourne Hotel, Dublin this evening, which was addressed by the recently appointed new Governor of the Central Bank, Dr Patrick Honohan.

“Over the last 18 months, the marginal rate of tax has increased from less than 44% to over 52%, and there is a real fear that it could rise to 58% in 2010. While we can all understand why some people may advocate this, we shouldn’t pretend that it is good economics,” said Mr Kelly.

“Firstly, as a way of raising revenue – it just doesn’t work. Despite the significant increase in PRSI, income tax rates, and the introduction of income levies the actual amount of money collected in income tax is in freefall. In 2007 the State collected €13.6bn in income tax, and despite significantly increasing rates, IBEC forecasts that this figure will fall to €11.6bn this year.

“Second, it has a very damaging impact on the ability of Ireland to compete internationally. FSI’s members in the IFSC are seeing this first hand as they struggle to attract and retain international talent.

“The Government has acknowledged that our economic recovery depends on the performance of our export sectors. In particular, financial services, business services, software and high-value manufacturing in ICT, pharma, and med-tech are crucial for job creation and tax revenue. Ireland will not experience an economic recovery unless these sectors experience substantial growth.

“These sectors are entirely dependant on skilled labour that can locate anywhere in the world. 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. 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.

“There is a real risk that tax hikes will spark an exodus of talent at the very time that the Government is trying to promote a Smart Economy. Neither foreign executives, nor highly skilled Irish workers and entrepreneurs will hang around to pay ever higher taxes. The companies, both foreign and domestic, that rely on them will not be far behind.

"If the Minister increases tax rates, it will lead to job losses," concluded Mr Kelly.