Brian Lenihan Jnr (Dublin West, Fianna Fail)

The Irish taxation system mirrors the practice in other jurisdictions and since the amendment introduced in the last Finance Bill, it is similar to the arrangement that obtains in Britain. There is nothing unique about the tax arrangements that apply in Ireland for the taxation of people resident in the State. From a taxation point of view, the main factor is whether a person is resident or non-resident in the State for tax purposes. Deputy Burton mentioned the possibility that we could use citizenship instead of residence as a basis for taxation and Deputy Morgan has an amendment on the subject so we might postpone that issue until we are dealing with that amendment.

Whether or not an individual chooses to live here or abroad for whatever reason is a matter for that individual. The State cannot interfere with an individual's choice of where he might want to live. The right to travel outside the State is enshrined in the Constitution and there is free movement within the European Union. There is, however, a major distinction between an individual who is non-resident in Ireland for tax purposes who has a source of income liable to Irish tax and an individual who deliberately to become non-resident in Ireland for tax purposes.

At the Committee of Public Accounts, the Chairman of the Revenue Commissioners stated that in 2007, some 5,803 people declared themselves to be non-resident for tax purposes. That does not mean all those people are not making genuine returns to the Revenue Commissioners. In line with general taxation principles, such individuals have a liability to tax in Ireland only with respect to the Irish-sourced income and income derived from working here. The only reason they submit an Irish tax return is that they are paying tax in Ireland. Some 5,803 individuals pay tax in Ireland on their Irish income. One cannot infer from this that in some sense there are 5,803 individuals who should be paying tax in Ireland in respect of their income in the rest of the world. Non-residents, including Irish citizens who do not have Irish sources of income or income from working here, do not have to make an Irish return.

Non-residents with a liability for Irish tax generally fall into two categories. First, there are those who have lived here for some time and have emigrated but retained some property or investments in Ireland that give rise to a taxable income. Such individuals may or may not be Irish citizens. As well as Irish-born individuals, they include migrant workers who came here temporarily, perhaps on secondments, and who have since left but have retained Irish investments. Second, there are those who never lived here but who have invested in our economy or worked here for short periods. It is unlikely that such individuals are Irish citizens. There is nothing wrong or illegal about either of these circumstances. This is the general circumstance. They are taxed in the same way as they are taxed in any other jurisdiction. The fundamental issue is that somebody must have a primary basis for his or her taxation.

In respect of Deputy Burton's view that there is a particular category of persons who have exiled themselves from the Irish tax system, there seems to be an erroneous view that one can simply identify those who choose to live outside the State because of our tax system as being in that capacity. The former chairman of the Revenue Commissioners dealt with this in the Committee of Public Accounts in November 2004 and said there is no such thing as a Revenue list of Irish citizens who are tax exiles. Only non-residents with Irish-sourced income or income derived from working here have a liability to Irish tax. Non-residents, including Irish citizens and others who may have resided here at some stage, do not have to make an Irish tax return if they do not have such a liability.

The Deputy's amendment seeks a report that will identify the number, status, rights and liabilities of individuals who were previously tax resident in Ireland but who now live abroad purely as a result of the Irish tax system. That is the substance of what the Deputy is asking me to compile. This is a purely drafting point, but it would not be appropriate for me to submit the information. Ideally the Revenue Commissioners, who have possession of this sensitive information, should do that. It would be a function of the Revenue Commissioners, but they maintain that it is impossible to distinguish between those who have deliberately left the country because of the tax system from those who left the country for other reasons. Very many Irish citizens choose to live abroad for reasons other than the tax system, so it is not self-evident that those who emigrate do so simply as a result of the tax system. That is the fundamental point on the report.

Deputy Burton may be suggesting that a number of individuals display themselves in a prominent way in Irish life. I do not think the Deputy made this suggestion, but the suggestion may be that they are not in compliance with our tax code and do not live the requisite number of days outside the jurisdiction but are based in the jurisdiction because of the publicity they attract when they are here. I took that to be the tenor of the Deputy's contribution earlier today, that it is maintained that a number of individuals do not have a liability to tax on their overseas income here in Ireland, that these individuals have a certain prominence in this country, particularly in charitable giving, and that this prominence of itself means they have a tax liability, notwithstanding that they live more than half the year outside the jurisdiction.

I was surprised that Deputy Burton said some individuals have come to her and said they should be exempt from income tax notwithstanding that they live in Ireland, which is a very serious matter. The law is very clear on this. If one lives more than half the year in Ireland one is liable to taxation in Ireland on one's domestic and overseas income. If one lives less than half the year in Ireland one is not liable to pay tax on one's overseas income but may have certain liabilities to charge in Ireland. That is how one comes to the attention of the authorities. There is a logic to that position because one has to be living half the year somewhere.

It would be very difficult to make progress on this issue in a purely Irish context. The real abuse is not the proper relationship that exists between the tax system in Ireland and that in the United Kingdom and other neighbouring jurisdictions, but the facility with which individuals can purchase a tax residency in microstates or smaller jurisdictions further afield. There is an issue there which world leaders have been discussing in the context of closing down tax havens and money laundering centres. Our legislation is as robust as that in any other country and conforms with the legislation in the United Kingdom. This is important because that is the place of most frequent connection and intercourse between us and the outside world. The legal arrangements that apply here are very similar, if not identical, to those that obtain in the UK.

The earlier provision, which was introduced by an Administration of which Deputy Burton was a part, providing for the so called "Cinderella rule" that a person could maintain that he or she left the jurisdiction before midnight and, therefore, was not in Ireland for the day, was repealed in last year's financial legislation. That brings us into substantial harmony with that which applies in our nearest neighbour with which we have the most frequent contact. That is the domestic position on the issue.

It would not be proper for the Minister for Finance to compile this report, because it relates to sensitive tax information which I am not supposed to access. If there is to be this amendment it should be a function of the Revenue Commissioners, and they say they cannot do this because the concept the Deputy has introduced appears to be more for a political purpose than for a strict tax purpose which they administer under their care and management of the revenue.

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