Aran Islands eye haven status

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By Paul Henley BBC News, Aran Islands

The mental associations people make with the phrase "tax haven" are unavoidable.

The Aran Islands don't immediately spring to mind as a tax haven location But nobody is trying to persuade anyone that the rocky Aran Islands, wind- and rain-swept, 10 miles off the west coast of Ireland in the mouth of Galway Bay, are a tropical paradise.

"When we're put in the same sentence as the Cayman Islands you kind of think 'yeah, right - not a hope!'.

"But why not? I feel we have an opportunity to go for something that's been talked about here for the last 20 years," says Cathy Ni Ghoill, manager of a local development organisation on Inis Mor, The biggest of the three main islands (population 850).

For her, the scheme that has been submitted to the finance ministry in Dublin is all about revitalising her island communities.

Boosting morale

"It would be great," she says. "The population is declining. The cost of living is higher. Employment is restricted. You're lacking basic social amenities - like going out to the cinema.

"There are a lot of disadvantages because of distances and cost of living and travel - but this tax plan could be the reason for people to return here. And, for any island, even to get one family [back] home - it makes a huge difference."

As well as the overwhelming support of islanders themselves, the plan has the backing of Udaras na Gaeltachta, the regional authority which oversees the Gaelic-speaking part of the country.

The people here would benefit to a point and, after that, we would get people coming in with no social conscience, not wanting to pay tax, putting their yachts here. And I would hate that to happen Padraigin Clancy, local resident

Chief Executive Padraig O'Haolain told me he had "spent the last five years trying to come up with a package of incentives that would give a lift to the morale of islanders, who know it's difficult to keep people there.

"I firmly believe in this," he adds.

What is proposed would allow residents to earn up to 100,000 euros (£80,000; $158,000) a year completely tax-free, and grant generous tax breaks and VAT refunds to businesses old and new, based on any of Ireland's offshore islands.

At present, it would affect around 3,000 people, at the mainland tax-payer's expense.

Shrinking population

But it is reported to be being seriously considered for the social benefits it could bring, possibly also for the scope it might provide for the government to save money by scaling down subsidies in the future. Most locals welcome the idea of offering tax breaks to island residents

Cathy Ni Ghoill stresses the social benefits.

"If the island population carries on shrinking," she says, "the country is going to lose a unique culture and heritage that is still alive in the islands, and that's why we're hoping that the government will see we need to keep it."

Wandering round the lanes of Inish Mor, past the cycle-hire shops, the large Spar supermarket, the bank and bureau de change, it is not immediately obvious, it has to be said, which elements of traditional culture stand to be lost.

Many of the locals live in sleek new-built five and six-bedroom bungalows, their ancestors' modest stone cottages knocked down or abandoned to the elements.

There are a couple of fishing boats moored in the harbour, but the industry, I was told, is all but finished.

Many former fishermen drive tourists around the island, at 16 euros a head, in recently purchased minibuses instead.

A souvenir shop specialises in "traditional Aran knitwear".

But there is not a farm or a sheep in sight, and the first these sweaters saw of the Aran Islands was almost certainly on arrival in one of the heavily subsidised high-speed ferries.

No free lunch

A group of local people in Kilronan health centre reluctantly agree to talk to me about their response to the tax scheme proposal.

Many live in large bungalows, which replaced original cottages

Padraigin Clancy is a lone voice of criticism, and her neighbours do not thank her for it.

"I feel very strongly that the people of the Aran Islands, the same as every other member of the Republic of Ireland, should pay their taxes," she tells me.

"We benefit from all kinds of grants from Dublin and from Europe and I don't think we deserve a free lunch.

"What would happen here is that the people here would benefit to a point and, after that, we would get people coming in with no social conscience, not wanting to pay tax, putting their yachts here. And I would hate that to happen. The poverty of Ireland should be dealt with before people on the Aran Islands get benefits."

Dublin decision

Whatever the possible effects of a change, strict planning and residency laws would almost certainly prevent complete outsiders buying up island property. You currently have to be a native Gaelic speaker, for a start.

But the prospect of outside investment seems very welcome to many.

"There's no golf course here, there's no marina. There's a lot of stuff that could be started up to benefit the island," says Gabriel Faherty, who drives a minibus on Inis Mor during the summer.

Cathy Nighail agrees: "We probably wouldn't mind some of the seriously rich, if they provided services that we couldn't provide.

"If there was another hotel with a leisure centre with a swimming pool - that would be brilliant."

It is now up to the government in Dublin to decide.