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

In the amendment the Deputy is requesting a comprehensive report on the trans-border workers' relief. I acknowledge Deputy Doherty has been raising this issue since the Covid pandemic changed work patterns and work flows on this island. This issue was discussed during the debates on last year's Finance Bill, when I undertook that the relief would be examined as part of the work of the tax strategy group, TSG, for 2021. This commitment was fulfilled and it was examined in a TSG paper. The Deputy also raised the issue of the relief on Committee Stage and, in particular, the Revenue Commissioners' temporary concession for the years 2020 and 2021 that was introduced in light of the exceptional and unprecedented circumstances arising from the pandemic. The concession provides that employees will still be entitled to claim trans-border workers' relief where they might be required to work from home in the State due to restrictions, provided all other conditions of the relief are met.

As matters stand, this concession is due to lapse at the end of the year. The Deputy has asked if the concession would be extended further due to the recent public health advice recommending that everyone should work from home unless it is necessary to attend a workplace in person. The Revenue Commissioners have been reviewing this matter and, having regard to the current circumstances, I can confirm that the Revenue Commissioners will continue to adopt a pragmatic and flexible approach by allowing for a further extension of the temporary concession. This extension will apply for the period of time in 2022 during which the public health advice recommends everyone should work from home unless it is necessary to attend the workplace in person. The Revenue Commissioners will issue further guidance on this extension in due course.

More broadly, with regard to the Deputy's request for a further report on the trans-border workers' relief, a comprehensive examination of the issue was undertaken by the tax strategy group. This encompassed very detailed consideration of all relevant matters, including the equity of treatment between Irish residents who pay tax in the State, the competitive position of Irish employers and the established principles of international tax. Ordinarily, to avail of the relief, the duties of employment must be performed wholly outside the State and in a country with which Ireland has a double taxation agreement. The relief was not designed to apply to remote working scenarios, and when examining whether the temporary concession should be placed on a statutory footing, the review identified a number of significant concerns from a policy perspective having regard to the interest of the wider body of taxpayers encompassing Irish-resident employers and employees.

The review noted that if the temporary concession regarding trans-border workers' relief was placed on a statutory footing, it would allow residents in the State to avail of the relief while working in the State and pay no tax to the Exchequer in respect of the foreign employment income. Where employment duties are carried out in the State, Ireland has a taxing right over that income. Not to tax that income would be asking the State to give up a taxing right it rightfully has under the Irish tax code. It is not clear why Ireland would not exercise those taxing rights and it is also unclear how another jurisdiction would then have taxing rights over income earned in the State in respect of duties carried out in the State.

The review identified issues relating to equity for Irish taxpayers. Currently, there may be different tax liabilities and different effective tax rates between those Irish residents who can avail of the relief compared with those who cannot avail of the relief. However, there is a key distinguishing factor in that the employment duties are exercised outside the State for a non-resident employer. The move to increased levels of remote working, including blended working arrangements, within the State weakens that critical distinction.

If trans-border workers' relief were to be relaxed to allow for work carried out in the State to qualify for the relief, there would no longer be a distinguishing factor between Irish residents as both sets of residents would be exercising their employment duties in the State.

In such circumstances some, those with Irish-resident employers, would be liable to tax at the Irish tax rate - income tax and USC - and the potentially higher effective tax rate, while others, those with non-resident employers, would be liable to tax at the tax rates in the other jurisdiction and a potentially lower effective tax rate. This would give rise to a question as to how Irish income tax rules could apply the different tax treatment for Irish income tax to an Irish resident solely because of the location of his or her employer as opposed to the location where that resident carries out his or her employment duties, as is the current position. From the perspective of all resident employees in the State, it would raise issues of equity and fairness that are fundamental features of our income tax system. It is unclear how this would be sustainable and acceptable from the perspective of all Irish-resident taxpayers.

The review also found that the competitive position of Irish-based employers or Irish-based activities could potentially be undermined. This is particularly the case where salaries would be subject to lower rates of tax. That may have implications for Irish-based employers' cost base and their ability to attract and retain employees from the talent pool.

On Committee Stage, Deputy Doherty suggested that if the temporary concession were not extended, individuals would be double taxed if they are working at home. It is unclear how this would be the case. Ireland has an extensive network of double taxation agreements, including with the United Kingdom, which have the effect of relieving double taxation on the same income source. If an individual does not qualify for trans-border workers' relief, he or she may be entitled to relief from double taxation under the terms of the relevant double taxation agreement. Thus, a double taxation charge would not arise for cross-Border workers.

It is important to note that Ireland is somewhat unique in having such a relief in its domestic tax code. There is no comparable measure in the UK tax code nor in many countries in mainland Europe that share land borders. This issue was reviewed in depth in recent months, including in the report we have discussed. I have also confirmed that, providing that all the conditions for the relief are met, Revenue's temporary concession will be further extended into 2022 for the period while the public health advice recommends working from home. Revenue will issue further advice on this extension in due course.

Therefore, in the absence of a new or compelling change in circumstances, a further review is not necessary now, which is why I cannot accept the amendment.

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