Irish Offshore Bank

Rise of the Irish Bank Offshore

Irish banking saw a huge influx of capital during the 1990's and early 2000's as the 'celtic tiger' profited from membership of the EU and forward-thinking government stewardship. The year 2000/2001 saw dramatically high growth of 10% for Irish GDP, but the calendar year 2001 resulted in only 5% growth, with 6% in 2002. In 2003 growth fell to only 2.7% but recovered to 4% in 2004 and 4.7% in 2005, rising again to 5.7% in 2006.

Ireland's membership of the EU saw it reinvent itself as a commercial centre, aided by an English-speaking, highly educated population which were seen as attractive attributes for American investors looking to take their first steps into the European market.

Ireland also grew impressively as a centre for offshore finance, with many offshore banks, insurers and mutual funds attracted to the International Financial Services centre by a generous 10% tax rate. Ireland also agreed a 12.5% corporate tax rate with the EU and resolved other issues about its tax initiatives which allowed them to maintain business successfully as an 'offshore centre'.

For a long time it walked the tightrope between offshore and onshore by offering a compromise status. Companies paid tax - so it couldn’t really be called a 'tax haven', yet they paid much less tax than at home.

Irish Offshore Bank Accounts

Not only companies profited. Ireland also became a large provider of offshore accounts to mainly UK customers looking to benefit from high interest rates not taxed at source. Everything was hunky dory until the financial crisis started to reveal cracks in Ireland’s banking system.

Irish Banks, similar to the Icelandic banks, held huge quantities of assets that were disproportionate to the countries' population and GDP. During the good times, they had led huge expanision programmes, lucrative for their top employees but not necessarily for their clients. When ready loans became hard to come by in the financial crisis they were left hung out to dry, and it became uncertain whether or not their bad assets could be bought up by the government whose means were comparatively small.

After an uncertain few months the Irish government took over what they saw as the riskiest bank, Anglo-Irish, thereby guaranteeing customer deposits there. Although government intervention 'secured' this money, for many the news became a source of insecurity. The implications of a government take over for those with offshore accounts is an especially thorny issue, since this allows the government access to private information which may be damaging for account holders. Pressure from tax authorities in the home countries of these depositors could well lead to their private information being handed over as part of an information-sharing agreement. Repercussions for UK citizens are especially worrisome.

Although Ireland has successfully negotiated favourable tax agreements for its offshore sector so far with the EU, the trend is towards ever increasing regulation and information sharing between EU nations. This makes Ireland an unsafe jurisdiction to bank offshore for UK, EU and even US citizens seeking privacy (since private information will be freely shared among high tax nations).