Sharp fall in number of tax exiles paying domicile levy

The number of wealthy tax exiles paying a €200,000 “domicile levy” almost halved between 2010 and 2012 despite the introduction of tighter restrictions.

Information supplied by the Revenue Commissioners shows 25 individuals paid the levy for 2010 but the figure fell to 14 for the 2012 tax year, despite Minister for Finance Michael Noonan removing a condition that only Irish citizens were liable.

The significant drop has led to suggestions from TDs and from the Opposition that the Coalition has failed to live up to its Programme for Government commitment to ensure tax exiles made a fair contribution to the exchequer.

The domicile levy was announced by minister for finance Brian Lenihan in 2009. It applied to Irish citizens who were Irish domiciled (whether resident or non-resident); had Irish assets worth more than €5 million; had worldwide income in excess of €1 million; and paid less than €200,000 in Irish income tax.

Following a perceived disappointing uptake in the first two years, Mr Noonan removed the citizenship condition “to ensure that individuals cannot avoid the levy by renouncing their citizenship’.

Greater share
But following the substantial reduction in the number of those paying the levy, two TDs who have campaigned on this issue questioned the commitment of the Government's commitment to make wealthy pay a greater share.

Fianna Fáil finance spokesman Michael McGrath said the original intention behind the levy was good but the yield has been negligible to date.

He said: "I believe that a more effective strategy would be to look at closing loopholes in relation to double tax agreement which may facilitate wealthy individuals who are effectively resident in Ireland to move abroad for short periods of time to avoid tax here. In particular we should look at reducing the number of days a person must be in the country before being deemed resident."

Labour TD Kevin Humphreys said the regime was not giving the returns he would expect.

“It is not fair if people avoid paying their fair share of tax by changing their domicile. If this is not working, we need to look at it again to make sure people pay their fair share,” he said.

Lower returns
The Revenue Commissioners said this weekend that the actual figure may eventually be higher because Revenue has only started its activities to ensure compliance. The Department of Finance made no comment on the substance of the policy but said the lower returns could be attributed to decreased assets or income putting individuals below the threshold, or increased income in Ireland that resulted in income tax payments of more than €200,000.

Mr Noonan has been reluctant to make changes in law or policy that would target wealthy exiles to pay more tax here. In a recent reply to a parliamentary question, he cited with approval submissions saying the current rules were clear and workable, those that expressed concern about the loss of foreign direct investment if rules were changed.

At present, those who are non-resident for tax purposes can stay no longer than 183 days in any one year, or 280 days over two years.

The figures supplied by the Revenue show that 25 paid the levy in 2010, 21 in 2011 and 14 in 2012. The amount paid in 2012 totalled €1.7 million.