Thursday 23 January 2020

Revealed: Government's rationale for keeping tax breaks for top talent

FOI document argues Sarp reliefs boost State haul of corporation tax, intellectual property, aviation leasing

FOI document argues Sarp reliefs boost State haul of corporation tax, intellectual property, aviation leasing. Stock Image
FOI document argues Sarp reliefs boost State haul of corporation tax, intellectual property, aviation leasing. Stock Image

Ken Foxe

Growth in corporation tax is driven in part by a special tax relief scheme available to senior employees of multinational firms, according to a Government department.

In a submission defending its retention, the Department of Business, Enterprise and Innovation (DBEI) argues that tax lost through the scheme - some €18.1m in 2016 reliefs alone - should be "seen in context".

The DBEI said many of those high-ranking employees "would not be based in Ireland if not for the availability of Sarp" - the Special Assignee Relief Programme.

It said most beneficiaries held important posts within information technology, pharmaceutical and financial services firms that, last year, helped to propel Ireland's corporation tax haul to a record €10.4bn.

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Under the scheme, 30pc of income above €75,000 and up to €1m is exempt from income tax; USC must be paid in full.

Beneficiaries can annually receive a €5,000 tax-free allowance for private school fees for each child and a tax exemption on the costs of one family return trip to their home nation.

In a submission to the Department of Finance obtained under a Freedom of Information (FOI) request, the DBEI argued that Sarp was a key driver in attracting critically important staff. The submission said Ireland was "competing for mobile talent" and this competition was "intense".

The Department of Finance last year reintroduced a cap of €1m on Sarp exemptions on earnings, following criticism that four people benefited from Sarp on annual pay exceeding €3m each.

The DBEI had previously refused FOI requests seeking its submission defending the Sarp regime.

"Our top marginal rate [of tax] applies from a very low level by international standards," the DBEI argued.

It said Ireland's high marginal tax rate contrasted with tax benefits for workers relocating to France, Holland, Denmark, Sweden and Spain.

The submission said: "Many of these schemes offered by our competitors offer reliefs to a wider range of workers and for a longer time period. For example, we are the only EU nation to restrict our scheme to assignees who have previously been employed by the employer or a related company."

It said the only other competitor imposing a maximum salary cap on Sarp-style tax breaks was Spain - primarily because of perceptions that millionaire soccer players in La Liga are its "main beneficiaries".

The submission said Ireland sought to woo companies' key figures here, because "the location of these key decision-makers will be a major influencing factor for taxing rights".

The 793 Sarp recipients in 2016 paid €42.33m in taxes, "money which may not have been payable to the Exchequer in the absence of the scheme".

The submission credited Sarp with increasing the flows of intellectual property, and aviation leasing, ICT, pharmaceutical and financial services activity into Ireland.

"Sarp claimants are generally highly mobile," the submission said. "It should be recognised, therefore, that this is a case where the 'cost' should be measured in terms of the outcome in the absence of the scheme."

In October, the Government extended the Sarp scheme by a further two years to December 31, 2022.

Small business leaders have argued that indigenous firms should gain the same ability to offer Sarp benefits to recruit top international talent.

Irish Independent

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