Dáil Éireann Debate, Tuesday - 3 March 2015
214. Deputy Michael McGrath asked the Minister for Finance if he has considered benchmarking the income tax rate paid by returning emigrants against typical rates they had been paying prior to returning to Ireland; the approximate cost of such a scheme; and if he will make a statement on the matter. [9115/15]
View answerI assume the Deputy's question refers to Irish emigrants, who may be subject to lower income taxation in the countries in which they are now located and presumably working, compared to the amount of income taxation they would face on the same income if they returned to Ireland. My initial view is that the provision of a tax reduction to such individuals could have the potential to distort the labour market. It could allow employers to offer reduced gross salaries to returning emigrants, which could put existing Irish based individuals at a disadvantage when competing for employment opportunities.
To allow the benchmarking suggested by the Deputy, would require detailed information of the tax systems of many different jurisdictions, as well as information on the tax actually paid by an individual in a particular jurisdiction. Certain factors would need significant consideration including the following; (i) the minimum amount of time an individual would need to have worked outside the State, (ii) would the relief be solely related to the amount of tax paid outside the State or would social security contributions also be included, (iii) would the availability of other public benefits and services be also included in the relevant comparisons and (iv) would such a relief be available to all returning emigrants regardless of how high their incomes are. Given all the potential variables it is not possible to cost such a scheme.
Notwithstanding the above, it is likely that any benchmarking scheme would be in breach of the freedom of movement principles of the European Treaties, particularly if it were to be restricted to returning Irish emigrants.
For the reasons outlined, I am not minded to provide for a relief along the lines suggested. However, the Deputy will be aware of the tax package included in Budget 2015, which reduced the marginal rate of income tax for those on low and middle incomes, who are subject to the top rate of income tax. As stated previously, I believe that this change, as well as further iterations of this income tax reform plan, will act to make Ireland a more attractive proposition, from an income tax perspective, for those Irish emigrants that may wish to return home.
