Tax young workers less to give them a leg up, accountancy groups recommend

It is argued that providing tax relief to people at an expensive stage of life could incentivise professionals to develop their careers here

Jon Ihle

June 24 2022 02:30 AM

The main accountancy bodies are proposing that young workers should get ‘frontloaded’ tax credits early in their careers to help with the costs of starting a family and buying a home.

The Consultative Committee of Accountancy Bodies-Ireland (CCAB-I) said in its pre-budget submission that the Government should increase standard tax allowances for under-35s, giving them more take-home pay.

This would both help attract talent to Ireland in key FDI industries such as IT and pharmaceuticals and incentivise Irish-educated workers to stay in the country.

“We need to turn our attention to personal tax rates, as they are impacting attraction and retention of talent,” said Cróna Clohisey, tax and public policy lead with Chartered Accountants Ireland, one of the members of the CCAB-I.

“Recalibrating personal tax allowances is a long-term project and the biggest obstacle will be overcoming political resistance to change. Nonetheless, personal tax allowance reform should form part of Ireland’s overall policy to retain talent.

Ms Clohisey said providing tax relief to people at an expensive stage of life could incentivise professionals to develop their careers here.

She said the initiative could be paid for by proportionally reducing tax credits for over-55s, who tend to have higher incomes and fewer expenses than younger workers.

Such an arrangement would be similar to existing tax write-offs for pension contributions, which become more generous the closer a person gets to retirement and therefore primarily benefit older workers.

The CCAB-I said retaining highly-qualified workers was a prominent concern among employers.

The submission highlighted ‘brain-drain’ in the medical profession as a “noticeable” problem, pointing out that while Irish universities were attracting medical students from around the world, they cannot secure internships in Ireland vital to progress their careers.

The CCAB-I is also seeking parity in taxation between corporate and individual landlords to stop the exodus of small landlords from the rental market, claiming that this too is making Ireland less hospitable to foreign direct investment.

The CCAB-I wants individual landlords to be charged the same 25pc rate on rental income – instead of 52pc – that corporate owners pay.

“By removing disparities, the tax system could be effectively harnessed to encourage landlords to stay in the market and new entrants to meet the supply shortage,” said Ms Clohisey.