PwC calls for tax breaks for “green” funds and their managers

PricewaterhouseCoopers has advised the Government to extend tax breaks to international investment funds focused on green issues, to help make Ireland a “hub” for green finance.

The firm, which advises major companies on tax, has also called on ministers to extend tax breaks to international fund managers involved in so- called ESG (environmental, social, governance) investment.

About 5.6 per cent of all ESG assets are domiciled in Ireland, PwC said in its pre-budget submission, which is focused on overhauling Ireland's tax system to drive the green agenda.

It said that more than €79.5 billion worth of ESG bonds are listed on Irish capital markets and ESG bond listings more than doubled in January and February this year, when compared to the same period in 2020.

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PwC warned, however, that Ireland could “get left behind and lose opportunities for growth” unless it further reduced taxes on ESG funds and the “key talent” who run them.

It called for a loosening of the rules around when capital gains tax is applied on the disposal of ESG fund shareholdings. It also called for “relaxation” of rules around when the 12.5 per cent corporation tax rate is applied to dividends, which can be taxed at a higher rate.

PwC suggested that in order to become an ESG fund hub and compete with other tax-driven locations such as Luxembourg, the State should reduce taxes on the “carried interest” normally held by top level fund managers.

“Marketing Ireland as a low carbon economy undergoing a significant energy transition could create new foreign direct investment opportunities,” it said.

The finance firm’s submission ahead of the release of Budget 2022 in October also calls for tax breaks on more environmentally-friendly aviation fuel.

The industry is currently developing so-called sustainable aviation fuel (SAF) from biofuels and synthetic sources.

To spur investment in such fuels and to encourage aircraft lessors based here to use them in their fleets, it suggested tax breaks for Irish-registered aircraft that are converted to more sustainable fuel types.

‘Tax levers’

PwC’s submission more more broadly called for pulling “tax levers . . . which will positively signify Ireland’s commitment to tackling climate change”. It called for further tax breaks for renewable energy development, such as capital allowances on the costs of grid connection.

It also called for the Employment Investment and Incentive Scheme (EIIS) to be expanded to allow for community-driven renewable energy schemes. PwC also called for CGT tax relief on the sale of retrofitted properties; reductions in stamp duty on energy efficient homes; and for Ireland to push within the European Union for lower duties on trade in goods made from recycled materials.