US chamber backs low rate of executive tax
Top executives should pay no more than 25 per cent of their total income in tax, including the universal social charge (USC), if they are to be encouraged to live and work in Ireland, the American Chamber of Commerce has suggested.
The chamber, which represents the interests of the American multinational sector in Ireland, has also proposed that the present €500,000 cap on the Special Assignee Relief Programme should be lifted.
In its pre-budget submission obtained under the Freedom of Information Act, the chamber said high marginal tax rates were acting as a disincentive for attracting the best talent to live and work in Ireland.
The Special Assignee Relief Programme was introduced in 2008 as an incentive scheme to get high-paid executives to relocate to Ireland with a view to bringing further employment. The chamber warned the take-up was “low” and did not help Ireland’s position in attracting talent from abroad.
It was modified in February last year and allows executives tax relief on 30 per cent of their income over €75,000 and up to €500,000 for five years after arriving in Ireland.
An executive on the top amount would be exempt from tax on €141,666 of their earnings, which would normally be taxed at 41 per cent, giving a net saving of €58,083.
A married executive in a single income household with a salary of €500,000 who avails of the programme now pays €172,540 in income tax and USC contributions. If income tax and USC were capped at 25 per cent of total salary, the same executive would pay €125,000, increasing net earnings by €47,457 a year.
They are also able to claim tax breaks on school fees and trips home for up to five years after arriving in Ireland.
The proposals proved to be controversial, with critics saying the measures were unfair given the extra tax burden imposed on ordinary taxpayers in successive budgets, but Minister for Finance Michael Noonan defended them on the basis that they were necessary to attract extra employment.
In its pre-budget submission, the chamber said changes brought into the scheme in 2012 made it less competitive and the level of impact and uptake had been “low”.
Anna Scally, the chairwoman of the chamber’s taxation group on the programme, said the modified scheme introduced last year was inferior to the previous scheme.
Under the previous regime, qualifying individuals were taxed on all income up to €100,000 and received tax relief on 50 per cent of the balance in excess of this amount. While the threshold has been reduced to €75,000, the tax relief is now at 30 per cent and is capped at €500,000.
She described the present regime as “very restrictive and complex relative to other jurisdictions” and not “competitive enough to make a material difference to investment”.
It also criticised the stipulation that an employee must be 12 months with a company before they could avail of the programme, that they be resident in Ireland and could not be jointly resident in another country.
The chamber states that the legislation is unclear for mobile executives who may be based in Ireland but would be travelling abroad a lot. It told the Department of Finance that it “genuinely wants” the relief to make a difference.
The Freedom of Information request concerned submissions before the budget in relation to raising taxes on higher earners. The Labour Party wanted a 3 per cent increase in USC on those earning more than €100,000 a year but this was rejected by Fine Gael and Mr Noonan on the advice of the multinationals.
The chamber said tax on incomes, compromising income tax, PRSI and USC combined, “were now at a level which is making it very difficult to retain critical technical and leadership talent . . . the pressure is acute for the higher skilled roles”.