Cablegate: Ireland: Finance Minister Cowen On the North,
This record is a partial extract of the original cable. The full text of the original cable is not available.
Tuesday, 08 March 2005, 14:11
C O N F I D E N T I A L SECTION 01 OF 02 DUBLIN 000286
EO 12958 DECL: 01/31/2015
TAGS PREL, ECON, EFIN, SOCI
SUBJECT: IRELAND: FINANCE MINISTER COWEN ON THE NORTH,
MONEY LAUNDERING, AND HIGHER EDUCATION
REF: DUBLIN 210
Classified By: Ambassador James C. Kenny; Reasons 1.4 (B) and (D).
1. (C) Summary. In a brief March 7 meeting with Finance Minister Brian Cowen, the Ambassador recommended U.S.-style tax incentives for university endowment contributions as a model for Ireland in addressing funding shortfalls for higher education. Cowen noted Ireland’s drive on economic and academic competitiveness and said that the GOI could consider the endowment idea as part of ongoing comprehensive review of the Irish tax code. On Northern Ireland, Cowen said that a strong message from the U.S. Congress to Sinn Fein could help to advance a final resolution in the peace proces, as would Congressional hearings on criminality. Cowen also noted that Sinn Fein seems to be playing a “double game” -- taking a hard public line against criminality, but avoiding definitive action in order to retain maneuverability for final negotiations with unionists. The Minister also pointed out that the Department of Justice (DOJ) was taking the GOI lead on investigations into the apparent money-laundering scheme uncovered on February 17-18, and he offered to arrange a DOJ briefing for the Embassy on the status of the investigations. End summary.
2. (U) On March 7, the Ambassador held a brief, cordial meeting with Finance Minister Brian Cowen.XXXXXXXXXXXX also attended, along with XXXXXXXXXXXX and XXXXXXXXXXXX. Econoff was Embassy notetaker.
Higher Education Funding
3. (C) The Ambassador related concerns expressed by U.S. firms and Irish universities that the quality and number of third-level graduates (roughly 16,000 in 2004) increasingly appeared insufficient to meet the needs of Ireland’s hi-tech economic sectors. The Ambassador noted that this problem had repercussions for Ireland’s drive on global competitiveness and was linked to limits on education funding, which derived from the Government’s long-standing decision not to impose university tuition for Irish students (a theme of the Ambassador’s March 3 speech at Trinity College). He cited the case of E-Bay, which had established offices in Ireland in 2004, but which was now several hundred employees behind in its hiring schedule because of qualification deficiencies among job applicants. With the reimposition of tuition fees off the table, said the Ambassador, an alternative funding mechanism for Irish higher education could be U.S.-style university endowments. Importantly, U.S. tax law encouraged individual and corporate donations to an endowment by making them tax-deductible. The Ambassador asked whether the U.S. endowment model might hold interest for the Department of Finance and also whether private contributions to university endowments were now, or could become, tax-deductible.
4. (SBU) Cowen thanked the Ambassador for his interest and cited the Government’s focus on competition, both at the university level and for the Irish economy writ-large. Cowen said that, in the Government’s drive to improve university education, the Department of Finance had concentrated on assisting the transition to better management structures in university administration. This effort entailed rationalizing curricula, faculty, and academic departments so as to eliminate obscure, under-attended courses with a view to making the most good for the most students. The extra motivation for the Finance Department’s efforts with the universities had come primarily from an OECD report in 2004 on Irish higher education, which claimed that Ireland was risking its global economic competitiveness without more extensive education reforms. He added that whereas endowments had not previously played a major role in education funding in Ireland, this was an idea that the Government might do well to consider, especially with the unlikely reimposition of tuition fees.
5. (C) Cowen confirmed that private/corporate donations to education endowments were currently not tax-deductible, a reflection of the fact that corporate and personal tax rates were already comparatively low. He added, however, that the Finance Department was conducting a comprehensive review of breaks/incentives in the Irish tax code and that endowment contributions could be examined in that context. To introduce tax write-offs for endowment donations, it would be necessary, said Cowen, to ensure that funds otherwise destined for government coffers would not simply be switched to the endowments. Second, the tax incentives for contributions would have to be designed to discourage contributors from dictating to the universities the way that their donations could be used, e.g., only for cancer research. Cowen observed that failure on this second point could allow contributors too powerful a voice in the design of student curricula. He noted that, with the surge in the number of wealthy Irish, there could be win-win situations for the universities in terms of funding resources and for contributors in terms of their tax burden. He said the Finance Department would welcome any additional U.S. perspectives on the endowment idea that the Ambassador might wish to offer.
Northern Ireland; Money Laundering
6. (C) On the Northern Ireland peace process, Cowen expected that Sinn Fein would “go off to sort itself out” following the party’s annual conference on March 4-6 in Dublin. He believed that, after the May Westminster elections, Sinn Fein would attempt to convince people of its seriousness about criminality through actions designed to back up the party’s recent positive rhetoric on the subject. Cowen related his impression that Gerry Adams was playing a “double game” -- taking a hard public line against criminality, but avoiding definitive action in order to retain maneuverability for final negotiations with unionists. Cowen thought the family of murder victim Robert McCartney had done a valuable public service in exposing this form of equivocation. The Minister also expressed hope that the U.S. Congress would deliver a strong message to Sinn Fein over St. Patrick’s Day on the need for a final resolution in Northern Ireland, especially with the IRA cease-fire now more than ten years old. A series of Congressional hearings on Northern Ireland focusing on the criminality question would, maintained Cowen, help to bring political pressure on Sinn Fein to take the necessary steps in pursuit of a final deal.
7. (C) When the Ambassador asked for an update on the GOI money-laundering investigation into the February 17-18 police seizures of roughly euro 4 million in sterling notes (reftel), Minster Cowen replied that the Department of Justice (DOJ) was the GOI lead on the case. He said, however, that the Department of Finance was as intensely interested in GOI progress as the Embassy, and he offered to arrange a DOJ confidential briefing for the Embassy on the investigations. Cowen noted that the briefing could include a supplement from the Ireland Financial Services Regulatory Authority (IFSRA, a component of the Irish Central Bank). He added that IFSRA had not reported any problems to date in pursuing the case in the context of its relatively new regulatory powers under the “Central Bank and Financial Services Authority of Ireland Act, 2003.”