Tax Reliefs Data

Dáil Éireann Debate, Thursday - 28 February 2019

Thursday, 28 February 2019

Questions (7)

Joan Burton

Question:

7. Deputy Joan Burton asked the Minister for Finance the savings that will accrue to the Exchequer from the €1 million cap on special assignee relief programme, SARP, recipients; the reason this was not extended to existing beneficiaries to date in 2019; the number of persons who accessed SARP in 2017 and 2018, respectively; the tax cost in 2017 and 2018; the number of existing beneficiaries that earn over €1 million; and if he will make a statement on the matter. [9968/19]

Oral answers (6 contributions)

Deputy Joan Burton

This question relates to SARP, which is the tax break for executives, particularly those earning over €70,000. In 2016, the cost of that tax break rose to €18 million per year. It was availed of by nearly 800 executives. I am concerned about a number of very highly paid people getting very high tax reliefs. I know the Minister has capped it this year for new people and for existing executives from next year. Can he give us the figures for 2017 and 2018?

Deputy Paschal Donohoe

SARP continues to be an important incentive. As the Deputy is aware, under the Finance Act 2018, there is no change in the level of income tax relief available in 2019 for existing beneficiaries of the programme and the new cap of €1 million is scheduled to apply to such taxpayers from 1 January 2020. In bringing forward such an approach, I was mindful of the need to proceed in a balanced way that, on the one hand and on the basis of the most up-to-date data, sought to curtail the extent to which tax relief would be available and, on the other, recognised the need to proceed in a measured and considered way in respect of those who have already taken decisions to relocate to Ireland on the basis of the programme as it applied up to the end of 2018.

It is not possible to accurately quantify the savings that will accrue to the Exchequer from the €1 million cap as this requires an estimation regarding the number of new applicants to SARP in the course of 2019 and their individual salary levels. However, curtailing the level of income tax relief was not only about prudent management, it was also about addressing the equity issues that arise from a small number of very high earners getting very significant levels of tax relief. The imposition of a cap at this level will have no effect for approximately 98% of SARP participants based on 2016 data. For example, in 2016, there were only 18 individuals out of a total of 793 with annual salaries in excess of €1 million; in 2015, there were eight individuals out of a total of 586; and in 2014, there were two individuals out of a total of 302.

Deputy Joan Burton

The information provided by the Minister suggests what I always felt about SARP, namely, that it is one of those schemes sold off the shelf by accounting and law firms around the world so people who are interested in tax avoidance might now be using Ireland for that purpose. In 2016, the scheme had some four people who earned over €3 million. Therefore, effectively, their contribution in terms of tax payable stopped at €1 million. This was worth at least €600,000 per year to each of those four people.

The Minister referred to tax justice and tax equity.

It is wrong. I can understand why Deputy Michael Noonan favoured this so much as it was very much his contribution to tax policy in 2012, when there was no activity at all in Ireland. However, it is time this scheme was drawn in.

Deputy Paschal Donohoe

As I said, it is precisely because of the concerns the Deputy has just articulated that I have decided to make this change. In terms of its revenue impact, in the grander scheme of what we collect, I expect it will make a small contribution over time. I have decided this change has to be made on the grounds of tax equity. It was an appropriate and a correct decision at a point in 2012, when, as the Deputy said, the level of economic activity under way was very low and we were all working hard to try to attract more investment into our country, particularly jobs-rich investment. Having reviewed two aspects - first, the growth in the number of individuals who were in the scheme and, second, the growth in the number of individuals at the top end of the scheme and the amount of tax relief they were earning - I decided the reapplication of the cap was necessary. That is what I have done and I will review the impact of that cap on job attraction and job retention across 2019.

Deputy Joan Burton

To refer to an earlier discussion, the view of the Dáil probably prevailed in regard to not increasing the cap of €500,000 for the top paid executives. In this case, there is merit in lowering the cap further to around the €500,000 mark. We are talking about somebody earning €1 million for whom the tax break will be worth the guts of €300,000. That is generous and could be minimised. We do not simply want to attract people to Ireland for the purposes of tax avoidance. We are also helping people in this situation with private school fees to the tune of some €5,000. We should continue this conversation so we get to a point where there is an equitable balance in favour of ordinary taxpayers.

Deputy Paschal Donohoe

I am happy to continue this dialogue with the Deputy and the committee throughout this year. The only objective of the scheme should be that we are providing support to individuals who play a role in either the retention or creation of jobs. Having evaluated the scheme against those objectives, I decided that the reapplication of the cap was needed in the context of the growth of the scheme, in particular the growth of a number of earners at the highest end of scheme. When I realised the amounts that were involved in the relief as it stood, which the Deputy pointed out, I decided this change in policy was needed.

Question No. 8 replied to with Written Answers.