The Irish Banking Federation (IBF), the main representative group for the banking industry, lobbied the Commission on Taxation last year to introduce generous tax incentives for bringing highly skilled foreign personnel to work in Ireland and stopping 'brain drain' from key sectors.

The proposals, which were broadly accepted by the commission, pushed for granting large reliefs on taxable income for "key talent" who transfer to Ireland, especially in sophisticated sectors – such as financial services – where the native labour pool does not entirely meet employment needs.

The IBF suggested the commission consider tax incentive models used by the Netherlands and Sweden, which exempt large chunks of income from tax altogether. The Dutch allow favourable tax treatment for foreign workers with specific expertise or experience that is scarce or absent in the country. Such people are entitled to a 30% deduction on taxable income for 10 years. Similarly, Sweden exempts 25% of gross salary for tax for three years.

The commission's own proposal is very close to the Swedish example, except it adds an income ceiling of €250,000, meaning there is a maximum reduction on taxable income of €62,500 regardless of salary.

The relief would be limited to "strategically important" workers in sectors where development would not occur without targeted incentives.

Many in the financial industry, including the insurance sector, are anxious that talent for the growth of the IFSC is in short supply and not sufficiently incentivised to come here to work.

Reinsurance firms and hedge funds, to take two prominent examples, are currently undergoing widespread restructuring and relocation in light of regulatory changes in various jurisdictions. Unfavourable conditions in financial centres such as Bermuda and the Cayman Islands are causing many to consider moving to European centres, with Ireland, Luxembourg and Switzerland considered the top candidates for an influx of new companies.

Since the skills needed to serve high-end financial services are in "short supply", Ireland should remove any tax impediments here to pull the best people away from our competitors in order to establish new lines of business here, the IBF said in its submission.

The body also requested that the rules for PRSI, capital gains and capital acquisition tax be harmonised to create a "fully integrated system" which can be easily marketed to prospective foreign personnel.