Joan Burton (Dublin West, Labour)
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Question 218: To ask the Minister for Finance his views on the US system of using citizenship to determine whether a person's worldwide income is subject to taxation; his views on the application of such a system here; the discussions he has had at EU level about the introduction of such a system across the EU; and if he will make a statement on the matter. [12599/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Since 1913, the United States (US) has had a system of citizenship-based taxation, under which a US citizen is liable to pay US Income Tax on their worldwide income, regardless of where they are resident. This is also combined with a residence-based system under which "resident aliens" (that is, non-US citizens who are resident in the US) are liable to US tax on their worldwide income.

A number of issues would arise if citizenship-based taxation was introduced in Ireland. Initially, there are large numbers of Irish citizens living abroad who have no Irish-sourced income or gains. These include all Irish people who have emigrated and made their lives abroad permanently for a variety of reasons, but chose to maintain their links with Ireland and Irish-citizenship. These people have no liability to Irish tax as they are non-resident within the existing residence rules and, even if domiciled in Ireland, have no income which is subject to Irish tax. Making these people subject to Irish taxation on the basis of citizenship would be an inefficient and ineffective use of the resources available to the Revenue Commissioners. The position of persons living in Northern Ireland would also have to be considered.

In addition, modifications would have to be made to Ireland's Double Taxation Agreements (other than the DTA with the US) to provide that one contracting State reserves the right to tax its citizens wherever they are resident. However, this would lead to difficulties in negotiating new DTAs or even the cancellation of existing DTAs, which would damage our international competitiveness. The change would also be against the OECD norm, whereby residents are taxable on worldwide income and non-residents are taxable on income arising in the State.

The Deputy will be aware that the Domicile Levy, which was announced in the Budget, is charged on an individual who is Irish-domiciled and an Irish citizen whose world-wide income exceeds €1m, their Irish-located property is greater than €5m, and their liability to Irish Income Tax was less than €200,000. The levy has been introduced to ensure that every wealthy Irish-domiciled person will make a contribution to the State. Finally, I am not aware of any discussions on the introduction of a citizenship-based taxation across the EU.