Foreign Direct Investment

Tuesday, 27 November 2018

Questions (161)

Pearse Doherty

Question:

161. Deputy Pearse Doherty asked the Minister for Finance the savings that would be expected if the special assignee relief programme, SARP, scheme was abolished. [48968/18]

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Written answers

Before addressing the question put down by the Deputy, it would be useful to recall the background to the Special Assignee Relief Programme (SARP) and the circumstances within which the relief operates.

SARP was introduced in Budget 2012 as part of a strategy to promote Foreign Direct Investment into Ireland, and to allow us to compete internationally to attract highly skilled and mobile executives who act as key decision makers within organisations.

The measure provides income tax relief on a portion of income earned by employees, who are assigned by their employer to work in Ireland, and who previously worked abroad for that employer for a minimum of six months. There is no exemption or relief from USC and PRSI is payable where the individual is not liable to social insurance contributions in the home country.

It should also be noted that individuals who benefit from SARP make a substantial contribution to the exchequer in terms of income tax, USC and PRSI which would not otherwise arise if these individuals were not located in Ireland.

The existence of an incentive like SARP is an acknowledgement that we are competing on a global basis for highly skilled and mobile executives. Given the mobility of these individuals, and the existence of similar assignee schemes in competitor jurisdictions, it is possible that if SARP was abolished these individuals would not have chosen to locate in Ireland.

The 2016 annual Revenue report on SARP shows that for the years 2012 to 2016 (the most recent year for which data are available) the costs of the measure were as follows:

Tax Cost2012	Tax Cost2013	Tax Cost 2014	Tax Cost2015	Tax Cost2016
€0.1 million	€1.9 million	€5.9 million	€9.5 million	€18.1 million

In relation to the €18.1 million tax cost for 2016, it is also worth noting that SARP directly generated 793 jobs in that year, which resulted in a very significant tax contribution to the exchequer. Employers also reported that an extra 477 employees had been employed by their companies in 2016, and 607 employees retained by companies in 2016 for which the exchequer benefited directly from additional tax from these associated jobs retained and created through SARP.

In terms of the Deputy's question, it is not clear that there would be any net savings to the Exchequer if the programme was abolished. On the contrary, it may well be the case that there could be a net loss to the Exchequer arising from such a move. As the Deputy is aware, only a proportion of income is disregarded for income tax purposes under SARP and the majority of a person's income remains liable to taxation. Also, as already indicated, USC applies on the full amount of the person's income. It is unclear what proportion of SARP beneficiaries, if any, might remain in the jurisdiction if the measure was withdrawn. Furthermore, such a withdrawal would inevitably have implications for the numbers of SARP-related jobs that would be created in the future and, by extension, the tax revenues that would be associated with those jobs.

As the Deputy is aware, I recently brought forward an amendment to the Finance Bill 2018 to place a ceiling on eligible income for SARP recipients at €1 million. This change will be effective for new entrants to the programme from 1 January 2019 and for existing beneficiaries of the programme from 1 January 2020. In addition, I announced that a full review of SARP will be carried out in 2019. I expect that this exercise will, among other things, afford an opportunity to examine in greater detail the issues raised in the Deputy's question.