There was a strong case to keep a special tax relief scheme for highly paid multinational executives because of the international crackdown on tax avoidance, the Department of Enterprise has advised.
In a pre-budget submission, the department, under Tánaiste and Minister for Enterprise Leo Varadkar, said global reform of how corporation tax was levied made the case for the controversial Special Assignee Relief Programme (Sarp) even more compelling.
It said there was a clear relationship between the location of key senior staff and corporation tax, which had been made “increasingly relevant” by international tax developments.
The submission said: “For intangible assets, the contractual right to an asset is no longer sufficient to establish the location of the asset for tax purposes. The decision-makers, the people who control the risks relating to those assets in an operational and functional sense, must be located in the jurisdiction.”
It said Ireland needed to ensure its personal tax rates did not act as a deterrent to “key management staff ... locating [here]”. They argued that the Sarp programme should be extended for five years and that its retention – or any changes to how long it lasts – should be signalled well in advance.
The scheme allows generous tax relief for executives moving to Ireland and was at one stage being used for “advanced tax planning” by some companies.
It also allows write-offs of private schooling fees of up to €5,000 and the cost of a return trip home once per year, if paid for by the person’s employer.
In the pre-budget document, the Department of Enterprise said there was a “lack of competitiveness” in how much tax “mobile, highly skilled workers” had to pay in Ireland when compared with countries such as France, Spain, the Netherlands and Luxembourg.
It said this “underscores” the need for the Sarp scheme to be continued and that the tax relief was a contributing factor in multinationals relocating skilled employees to Ireland.
The department said it had also been told by IDA Ireland that changes in eligibility for the scheme after a three-year period had created “unnecessary uncertainty” for client companies.
“This is particularly the case in years two and three of the rollover, where companies are concerned that the relief may be withdrawn in advance of the assignment commencing and equally that the relief may be withdrawn at an early stage of the assignment,” the department wrote.
A separate section of the pre-budget submission said the scheme “alleviates some of the personal taxation challenges” in relocating staff to Ireland from overseas. It said feedback to the IDA about personal taxation – and Ireland’s apparently high rates of tax – meant its “continued existence is important”.
It added: “A key ask of IDA will be that the usual three-year extension be increased to at least five years in order to remove some uncertainty for clients.”
Asked about the records, a spokeswoman for the department said they had nothing further to add to the information that was released under Freedom of Information legislation.