Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I move amendment No. 11:

In page 18, between lines 35 and 36, to insert the following:“Amendment of section 825C of Principal Act (special assignee relief programme)

15.Section 825C of the Principal Act is amended—

(a) in subsection (2A)(e), by substituting “within 90 days” for “within 30 days”, and

(b) in subsection (2B)(b)(i), by substituting for “but in respect of the tax years 2012, 2013 and 2014 where this amount exceeds €500,000, “A” shall be €500,000, and” the following:

“but—

(A) in respect of the tax years 2012, 2013 and 2014 where this amount exceeds €500,000, ‘A’ shall be €500,000,

(B) in respect of the tax years 2019 and 2020, in the case of a relevant employee who first arrives in the State on or after 1 January 2019 for the purposes set out in subsection (2A)(b), where this amount exceeds €1,000,000, ‘A’ shall be €1,000,000, and

(C) in respect of the tax year 2020, in the case of a relevant employee who first arrives in the State on or before 31 December 2018 for the purposes set out in subsection (2A)(b), where this amount exceeds €1,000,000, ‘A’ shall be €1,000,000,

and”.”.

The special assignee relief programme, SARP, was introduced in budget 2012. It aims to reduce the cost to employers of assigning skilled individuals in their companies from abroad to take up positions in their Irish based operations. The relief is time limited on the basis that it is expected that assignees will transfer skills to Irish-based employees over the course of the five-year period and thus support the establishment of long-term high-quality employment.

Ireland's enterprise policy is based on export-led growth underpinned by innovation, talent and technologies to deliver long-term sustainable economic growth. Foreign direct investment has been and continues to be an integral part of Ireland's economic development. The existence of an incentive like SARP is an acknowledgement that we are competing on a global basis for highly skilled and mobile executives. The competition for this talent is intense, especially for the types of skills required to facilitate the development and expansion of business in Ireland.

Specialist assignee tax relief schemes are in operation in many of the jurisdictions that we compete with for foreign direct investment. These kinds of incentives can be a persuasive factor. In tandem with our corporation tax rate, SARP is intended to help us to compete for foreign direct investment. Under the relief, a proportion of earnings from SARP employment is disregarded for income tax purposes. The proportion is 30% of income above €75,000. USC continues to be payable as is PRSI depending on the individual circumstances.

Employer returns to Revenue indicate that in 2016 a total of 1,084 non-assignee jobs were supported as a result of SARP. The figure is greatly increased from the early years of the incentive. In 2012, for example, only six non-assignee jobs were supported by SARP. Available evidence suggests that the programme is achieving its goals.

A review and public consultation on the incentive in 2014 raised concerns. Accordingly, several changes were made to SARP in budget 2015, including the removal of a cap of €500,000 in eligible income from SARP beneficiaries in the hope of increasing uptake and encouraging the growth of higher quality foreign direct investment. In the years subsequent to the review Revenue analysis has shown that the incentive has greatly increased in popularity, with 793 individuals availing of the scheme in 2016 and employers reporting job creation and retention directly as a result of the scheme. However, as Deputies will note from the recently published Revenue report on SARP, the cost of the scheme stood at €18.1 million in 2016. This is an increase from €9.5 million in the previous years. The report indicates some of this increase can be attributable to a small number of individuals claiming SARP in respect of particularly high incomes of over €1 million. There were 18 such individuals in 2016. The report found that the number of participants earning an annual income in excess of €675,000 increased by 340% in the period from 2014 to 2016. Moreover, although the number of beneficiaries in 2016 earning annual incomes of €1 million or more was relatively modest, the percentage increase has been in the order of 800%. It has gone up eightfold, from two in 2014 to 18 in 2016. It should be remembered that the average salary under SARP when the incentive was introduced in 2012 was a little under €150,000. This amount has increased to approximately €250,000 and almost half of the individuals in SARP are in receipt of salaries between €75,000 and €150,000. The increase in cost for this reason was not anticipated when the cap was removed and I have decided that the amount of relief being claimed at high incomes raises equity issues. I believe I must address these issues without delay.

I propose to reimpose a cap of €1 million in eligible earnings for new entrants. Based on the 2016 figures this would affect fewer than 2.5% of recipients. The changes will apply from 1 January 2019 for new entrants and from 1 January 2020 for existing recipients.

Reimposing the cap in this manner will ensure that the scheme is not open to over-exploitation while leaving those with incomes under €1 million - still an exceptionally high income - unaffected. This scheme is due for full review during the course of 2019. The review will afford us an opportunity to look at all elements of the scheme. Given that I intend to commission this report in advance of the Finance Bill 2019, I do not propose to accept the amendment tabled by Deputy Pearse Doherty.

A number of stakeholders made the case that the current 30 day application reporting period is too restrictive given the delays faced in obtaining a personal public service number, PPSN, and other pressures faced by individuals in relocating to Ireland. Given that I am making a Report Stage amendment to the incentive and the fact that this is primarily an administrative matter, I propose to make a further technical amendment which will see the reporting timeframe extended from 30 to 90 days for initial reporting by the employer to Revenue after the arrival of the employee in the State.

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