Bertie Ahern (Dublin Central, Fianna Fail)

I move Financial Resolution No. 2:

(1) THAT, as respects the year of assessment 2006 and subsequent years of assessment, the Taxes Consolidation Act 1997 (No. 39 of 1997) be amended in subsection (2) of section 18 by substituting the following for paragraph (f) of Case III of Schedule D:

"(f) income arising from possessions outside the State except, in the case of income from an office or employment (including any amount which would be chargeable to tax in respect of any sum received or benefit derived from the office or employment if the profits or gains from the office or employment were chargeable to tax under Schedule E), so much of that income as is attributable to the performance in the State of the duties of that office or employment;".

(2) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

I will take Financial Resolutions Nos. 2 and 3 together for the subject of the debate.

Financial Resolution No. 2 is on income tax. It changes the tax treatment of certain earnings covered by the remittance basis of taxation, a basis which applies in circumstances under the current system. Where an employee, although resident and employed in the State, is either not domiciled or not ordinarily resident in the State, he or she may avail of the remittance basis of assessment in respect of income from a foreign contract of employment other than United Kingdom employment. This confines his or her tax liability on the earnings on such employment to the amount remitted to the State in the tax year. Earnings that are paid outside the State or the United Kingdom and are not remitted into the State are not liable for tax here. That is the present system, which used to be a limited system mainly for some of our people who were domiciled abroad. It was a narrow issue. When I was in that job, only a handful of people used to benefit from it.

In recent years, however, there has been increasing use of the remittance basis in the tax planning of remuneration packages. The Revenue Commissioners have indicated that the remittance basis is now being increasingly used in a wide variety of enterprises. In many instances, although categorised for tax purposes as covered by foreign contracts of employment, the duties of the employment are actually performed mainly, if not wholly, in the State. The individual is here to work but the payroll is going elsewhere. They are given what is needed for essentials here and only pay taxes on that. This is now being widely used. For example, use of the remittances basis appears to be a feature of many construction companies which use non-domiciled workers.

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