Paul Gavan (Sinn Fein) | Oireachtas source

I move recommendation No. 3:

In page 20, between lines 28 and 29, to insert the following:

“Report on Trans-Border Workers’ Relief in the context of Cross-Border Workers

16. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a comprehensive report on the Trans-Border Workers’ Relief in the context of people who reside in the State and work in the North and the tax status and options of people who reside in the North and work in this State.”.

The issue of transborder workers was raised in the debate on last year's Finance Bill debates, specifically in the context of people who reside in the State but work in the North and who avail of a domestic tax relief, known as transborder workers' relief, as provided for in section 825A of the Taxes Consolidation Act 1997. Transborder workers' relief is for people who are resident in the State but travel daily or weekly to work in another country and pay tax in that other country. This tax relief is not normally available for Irish residents who work from home in the State. In light of the unprecedented circumstances arising due to the Covid-19 pandemic and the resulting public health restrictions to limit movement, for the tax years 2020 and 2021, Revenue confirmed that a concessional treatment for this relief would apply, whereby if employees are required to work from home in the State due to Covid-19, such days working at home in the State will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.

The relief effectively removes the earnings from a qualifying foreign employment from the liability to Irish tax where foreign tax has been paid on those earnings and such tax is not refundable. The effect of the measure means that individuals who qualify for the relief will not pay any Irish tax on their employment income. Irish tax will only arise where the individual has income other than income from the qualifying foreign employment.

There are a number of criteria that must be satisfied for an employee to be eligible. In particular, the employment duties must be exercised wholly outside of the State in a country with which Ireland has a double taxation agreement. None of the duties of employment can be performed in the State, save those considered incidental to the performance of the duties outside the State.

The Minister for Finance undertook that the operation of the transborder workers' relief would be examined as part of the tax strategy group, TSG, 2021 process, which would consider 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.That paper concluded:

... it appears impracticable from a legal perspective, in terms of taxing rights, as well as challenging from a policy perspective when having regard to the interests of the wider body of taxpayers encompassing all Irish resident employees and employers, to place the concessional treatment on a statutory footing.

The tax strategy paper reached this conclusion based on issues of taxing rights, equity and competitiveness.

There are issues raised in the paper that are warranted and require due consideration, but other issues were not addressed. First, section 6 of the paper considered the issue of social insurance and noted that social insurance rates in the North are higher than those in the South. However, the examples in section 3.2, which considered equity, failed to take account of employee social contributions when comparing the effective tax rates paid in both jurisdictions. Sinn Féin believes that this is a flaw which undermined the comparison, and would welcome comment from the Minister on that. Second, the proposal of the Cross-Border Workers Coalition was to limit the number of days that cross-border workers could work from the State to 183 days while still being able to claim the relief. Third, it proposed that other controls could be introduced, such as limiting the scope to those in non-executive roles and the consideration of a salary threshold. Given that this is the case and in light of the importance of developing the all-island economy and the move to remote working, we believe the matter warrants further examination.