Cost of Sarp tax reliefs for overseas executives rises sharply

But number of multinational executive jobs supported via tax scheme ‘falls sharply’

The number of jobs being supported through a lucrative tax-relief scheme for highly-paid multinational executives has “fallen sharply” according to an internal briefing for Minister for Finance Paschal Donohoe.

However, the cost to the taxpayer had also more than trebled to €73,000 for each job that was being supported, which was described by officials as a “cause for concern”.

The submission – prepared for Mr Donohoe last autumn – said the cost per job through the Special Assignee Relief Programme (Sarp) had been just €23,000 in 2017, or less than a third of the rate in 2018.

Making comparisons with figures from years prior to that were "even less flattering" according to the Department of Finance document, which was released under freedom-of-information legislation.

The scheme allows generous tax relief for executives moving to Ireland and was at one stage being used for aggressive "advanced tax planning" by some companies.

Eighteen people earning between €1 and €10 million had benefitted from the scheme in a single year, which lead to the introduction of a €1 million income cap in 2019.

Mr Donohoe agreed on "lines" put forward by officials to use if Sarp and its operation came up for discussion in the Oireachtas.

The Minister was advised to emphasise the fact that the €1 million cap had been introduced if questions arose about the controversial scheme.

The submission said: “In such an event, the point can be made that the data in the Revenue report may serve to reinforce the wisdom of the decision to impose the salary cap in Finance Bill 2018.”

However, officials had already conceded in the submission that they did not have “any visibility” on what impact the cap might have had.

Cost-rise ‘alarming’

The submission raises significant questions over the effectiveness of Sarp, according to Labour finance spokesman Ged Nash.

“The story of Sarp is one of fewer jobs propped up by ever-increasing costs to the exchequer. It is alarming that the cost of the scheme has risen by a staggering €50,000 per job year on year.

“This is precisely why the Minister must now embark on a formal, in-depth review of the rationale for the scheme as it is currently constituted. Such a review must seek to determine whether or not the programme ought to continue to exist at all from a value-for-money and public-policy point of view.”

The department submission described how 584 Sarp-related jobs were being supported in 2018 at an average cost of €72,500 each.

A year earlier there had been 1,222 “Sarp-supported” jobs at a cost of €23,000 each, it said.

“The numbers in the tables suggest that the cost per job has increased by over 200 per cent compared with 2017 and by over 800 per cent compared with 2015,” officials wrote.

The submission speculated that the low number of jobs may not give a complete picture because of delays in the process for reporting.

However, it added: “At the same time, the fall in the number of jobs created and retained and the sharp rise in the cost per job are a cause for concern.”

A spokeswoman for the department said the fall in jobs created was concerning but noted the effect of introducing a cap had not yet been reflected in the data, and also the possibility of reporting delays.

“A further assessment will be carried out later this year when data for 2019 become available,” she said.