John Curran (Dublin Mid West, Fianna Fail)

The recommendation before the House suggests a change to section 150 which concerns the domicile levy. The levy will be payable by an individual who is Irish-domiciled and an Irish citizen, whose worldwide income exceeds €1 million, whose Irish-located capital is greater than €5 million and whose liability to Irish income tax in a tax year is less than €200,000. The Senator's recommendation seeks to change our tax residency rules for an individual who pays the domicile levy. An individual is treated as resident in Ireland if he or she is present here for 183 days in the year. Alternatively, an individual is tax-resident if he or she is present in the State for 280 days or more between the current and previous year. This is known as the 280-day rule, sometimes known as the look-back rule.

It is assumed the intention behind the recommendation is to remove this 280-day rule in the case of anyone liable to the domicile levy. The effect of the abolition would be that an individual liable to the domicile levy would be able to spend at least 182 days in the State each year and never be treated as tax-resident in Ireland. At present, individuals can stay an average of 139 days in the year without being deemed resident. The measure would effectively allow these individuals an additional 43 days for which they could be present in the State without becoming resident. Therefore, I cannot accept the recommendation for the following reasons. It would create a two-tier system for determining tax residents, a particularly favourable one for those subject to the domicile levy and a stricter system for everyone else. This is not in line with the thrust of certain measures in the Bill, for example, section 151, which follows a recommendation of the Commission on Taxation by abolishing a measure which allowed a more favourable residency regime for certain individuals, or the recent abolition of the Cinderella rule. It would bring considerable doubt and uncertainty to determining tax residency and it may not be possible to administer the measure easily.

An individual's tax residence for a year is not capable of being determined unless his or her liability to the domicile levy is determined. It is not clear how, if at all, the recommendation could be made to work for an individual not consistently liable to the domicile levy year on year. It would become impossible to apply the tax residency rules year on year in any consistent fashion where an individual is only liable to the domicile levy occasionally. The individual might be subject to the 280-day rule in one year but not the following year.

I presume the intention behind the recommendation is to provide a favourable tax regime for an individual who wishes to invest in the country. In this context, I point out to Senators that the domicile levy legislation provides that the Revenue Commissioners may give an advance opinion to an individual who is considering whether to make a significant investment in the State. This opinion may relate to whether he or she would be likely to be regarded as an individual domiciled in and a citizen of the State in the relevant tax year. However, there is no obligation on the Revenue Commissioners to give such an opinion.

While there has not been time to consider fully the implications of the recommendation, there is a possibility that its acceptance could result in a loss of income to the State. For example, someone who is a tax resident under the look-back rules is liable to income tax on his or her worldwide income. If that rule were abolished, he or she would only be liable to Irish income tax on Irish-sourced income. The payment of the domicile levy may not be sufficient to compensate the Exchequer for the loss of income from people who become non-Irish tax-resident as a result of the change. For these reasons, I cannot accept the recommendation.

Recommendation, by leave, withdrawn.

Question put: "That the Bill with recommendation be received for final consideration."