Alice-Mary Higgins (Independent) | Oireachtas source

I move recommendation No. 3:

3. In page 20, between lines 15 and 16, to insert the following:“(3) The Minister for Finance shall, within thirteen months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on—

(a) the total amount of tax advantage accrued to qualifying companies in respect of the Key Employee Engagement Programme, and

(b) the total amount of revenue foregone to the exchequer as a result of the Key Employee Engagement Programme.”.

This recommendation is in respect of the key employee engagement programme, an initiative within the Finance Bill in respect of which I am very concerned. Senators heard earlier of a 2:1 or 3:1 ratio in terms of tax cuts to increased in investment in public services but I suggest that the amount of tax cuts and reliefs in the budget is potentially far higher because the budget contains measures in respect of which we are unaware as to the likely cost to Revenue. We do not know what the figures for tax and revenue foregone will be and such measures create a risk in terms of fiscal probity and the further hollowing out of our tax base.There is also a concern, given the commitment to equality and gender proofing of the budget, that the measures proposed under the key employee engagement programme, KEEP, disproportionately benefit those higher earners. It will only benefit those in private companies and not those working in public services.

In terms of the scheme, details of which are set out in the Bill on pages 16 to 18, inclusive, I will skip the preambles and cut to what I believe is the core. Part 3 states that as the scheme is introduced, any gain realised on the exercise of a qualifying share option after 1 January 2018 shall be exempt from income tax and shall not be reckoned in computing income for the purpose of income tax. Effectively, this measure is taking share and stock options that are given as part of remuneration packages, which is usually done, with some exceptions, for high-earning individuals. Those stocks and share options will not be calculated in terms of income tax but will be taken out of the normal income tax procedure. The Minister will tell us they will be taxed in other ways later but those ways will not amount to the same procedure. It is the less and later model of taxation we have seen in terms of share and stock options. There is a real concern that we are moving away from recognising that somebody's package, be it a wage of €150,000 and a €50,000 share and stocks option, which would normally be taxed as €200,000, will now be taxed at €150,000 in terms of income tax and that the other €50,000 may or may not, depending on what other reliefs and schemes they have, be picked up later.

There is also a real danger of a perverse incentive, because given this measure, it is easy to see how people may decide that they would like to have 50% of their wages paid in the form of stocks and share options, and the Bill specifically provides for that. It provides for up to €100,000 a year of stocks and share options and up to 50% of the total emoluments and total pay package over a year to be treated in this way and through this new tax relief.

This is a very serious concern at a time when concerns have been raised in other areas, which I will not discuss now, about some of the corporate tax and corporate welfare systems. The concern is that we are embarking on a measure where we do not know the cost to Revenue. The cost in the Budget Statement was €10 million but it has since been clarified that that €10 million is the cost of the setting up of this scheme. That is not the cost of tax forgone. However, we know that when IBEC lobbied for this measure two years ago, its estimate of the cost was €80 million. That is how much IBEC put on the cost of this scheme two years ago.

I will be opposing this section because it is badly thought through and is dangerous at a time when we are looking at great uncertainty in other areas of our taxation, including areas such as corporation tax where the international landscape is moving around us. We should not be risking loss in this area. I would point out again that there is a great inequity. This is a tax measure which will only benefit those in private industry in a certain kind of private industry company. It is not something which will be of use to low earners. I will not make the same contribution again when opposing the section but my recommendation is simply to ask that within 13 months of the passing of this Bill, to allow for revenue to be collected for a full calendar year, the Minister might prepare and lay before both Houses of the Oireachtas a report on the total amount of revenue forgone to the Exchequer as a result of this scheme. I welcome the fact that the Bill gives Revenue the power to ask, company by company, for figures on the total amount of tax advantage. I would like that total amount of tax advantage that accrues to qualifying companies to be made explicitly clear, not necessarily company by company because there may be commercial sensitivity, but in terms of the total amount of tax accrued to all qualifying companies in respect of the key employee engagement programme during 2018, and for that information to be made available to us. I ask the Minister to address that recommendation. I will not speak at such length in terms of the opposition to the section but I will speak briefly again.