Cowen to abolish 'remit' tax system

Minister for Finance Brian Cowen will abolish the controversial "remittance" tax regime for foreign executives in Thursday's Finance Bill, thus boosting the Exchequer by about €100 million per year from 2008.

It is thought the Minister has not been influenced by the intense lobbying undertaken by the multinational business sector since he revealed plans in December's Budget to remove the system. It had been rumoured at one stage that the Minister might reconsider the project but he is now said to be determined to reform the system. The move will form part of a package of measures in the Finance Bill, which will also introduce new incentives to encourage lower-paid workers to invest in pensions.

The remittance system allows executives working for overseas companies in the Republic to receive their salary outside the jurisdiction and pay tax only on the money they "remit" or bring into the State to support themselves. In the Budget, Mr Cowen said the yield from his proposed change would be about €50 million in 2006, €75 million in 2007 and €100 million in subsequent years.

In December, the American Chamber of Commerce in Ireland, which represents the interests of about 600 US companies with operations in the State, said removing the remittance scheme "sends out a signal disproportionate to its intent".

The Minister is also expected on Thursday to introduce measures that will increase the appeal of pensions for people on lower incomes. It is thought most likely that the Minister will introduce a special relief for holders of Special Savings Incentive Accounts (SSIAs) who roll their funds into pensions, with the relief designed to particularly benefit those on lower incomes.

The Sunday Business Post reported yesterday that the benefit would essentially amount to a cash payment to top up funds transferred from an SSIA into a pension.

In the Budget, Mr Cowen said his objective was to "provide reasonable tax relief subject to limiting the amount the general taxpayer is required to finance".

The Finance Bill, which gives effect to the Budget, will also introduce a new scheme of tax relief for heritage properties donated to the State, subject to an annual cap of €6 million on the relief. The Bill will also contain measures to assist the development of the leasing sector within financial services.