Sunday 24 September 2017

Midnight fairytale over as Cinderella clause abolished

Fionnan Sheahan Political Editor

THE controversial "Cinderella rule", which allows multi-millionaire tax exiles to leave the country before midnight without the day being counted for tax purposes, is to be scrapped.

But Finance Minister Brian Lenihan was not able to say yesterday precisely how many super-rich non-residents will be hit by the closure of the loophole.

He said figures from 2005 showed there were just 19 people who paid some tax on income in Ireland but who were otherwise were registered abroad.

But he has no idea how many were tax exiles and not contributing at all.

The loophole was the subject of controversy for several years, as it was claimed that tax exiles ensured their day in the country was not counted by simply heading to the North for a few hours before midnight, or leaving in a private jet or helicopter, only to return some hours later.

At the moment, tax exiles who are here for less than 183 days a year do not have to pay their full tax in this country. But a day is not counted if the individual leaves by midnight, hence the tax regulation earned the nickname the "Cinderella rule".

From now on, though, once a person who is a tax exile is in the country at any part of the day, the day counts for tax purposes.

The rule on the 183 days in a calendar year, or 280 days over a two-year period, was set down in 1995.

The minister stressed that the 183-day limit cannot be reduced as the Government is locked into tax agreements with numerous other countries. But Mr Lenihan said it was not fair in the present economic difficulties that super-rich individuals could leave the country before midnight and avoid that day being counted for tax purposes.

"I'm putting an end to that practice," he said.

"The so-called Cinderella clause is being abolished," Mr Lenihan added.

Loophole

After calling for the closure of the loophole for several years, Labour Party finance spokeswoman Joan Burton said she welcomed the change.

"Up to now, there was a blatant abuse -- the 'midnight rule', whereby a non-resident tax exile could spend a day in the State provided they left by midnight in their jet or helicopter.

"The amendment of this rule follows a long campaign by the Labour Party to close down this abuse of the non-residency rules by a select coterie of tax exiles."

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