US embassy cable - 05DUBLIN286

C O N F I D E N T I A L SECTION 01 OF 02 DUBLIN 000286 
 
SIPDIS 
 
E.O. 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.  Department of 
Finance Secretary General, Tom Considine, also attended, 
along with Ann Nolan and Eamon Kearns, Principal Officer and 
Director, respectively, in the Department's Public 
Expenditures Division.  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." 
 
KENNY