Month: December 2018

THE government considered a special tax regime that could have allowed thousands of highly paid executives in large multinational companies to pay a flat rate of just 30% in the tax.

The plan – which was designed to be one of the most generous tax incentives in Europe – was abandoned however, following advice from the Attorney General.

Legal advice given to the Department of Finance suggested the regime could fall foul of European Union rules on state aid.

Full details of the proposed regime have not been made public before with the Department saying the idea had come about as the result of a “brainstorming” session.

The scheme would have created a large group of people who would have operated in an entirely separate tax system to the rest of the country for up to five years each.

Details of it explain how it could apply to up to five percent of a company’s workforce in return for their employer creating ten jobs per beneficiary.

An internal submission said: “The assignee would have paid either a flat rate of tax of 30% or an effective rate of tax of 30% on salary in excess of €75,000.

“There would have been no upper salary limit. A maximum of 5% of a company workforce could avail of the relief.”

The Department said it would have been managed and overseen by the IDA while the Revenue Commissioners would look after the granting and administration of the tax relief.

The submission said this scheme was the “preference” of the Department of Finance but that this had been scuppered following discussions with the Attorney General.

“Advice was received that the new proposal has the potential to raise state aid issues,” the submission said.

“The proposed requirement to include IDA certification of the jobs created after three years and the mandatory nature of the requirement for job creation could result in the scheme being considered State Aid rather than as a taxation measure.”

The scheme was proposed ahead of Budget 2015 as part of a review of a separate incentive scheme known as SARP, or the special assigned relief programme.

SARP is a smaller-scale scheme that allows for 30% of income earned above €75,000 to be exempt from tax along with tax-free allowances for school fees and one trip home a year.

A cap on the scheme has just been introduced by the Department of Finance after the amount claimed under it doubled in the space of a year even while the number of jobs it created stalled.

This year’s ministerial submission explaining in detail why removal of the cap was needed has been withheld under FOI by the Department.

They said its release would be “contrary to the public interest” before the Finance Bill was enacted.

The earlier submission on the SARP scheme explains why the relief was originally extended and the cap on earnings removed.

It said that because of international moves to curb tax avoidance schemes (including the notorious ‘double Irish’), Ireland needed a generous scheme so as to stay competitive in encouraging foreign direct investment.

The scheme had until then proven something of a “deadweight” and was considered to be “of limited value in its current form”.

Instead, the submission said it should be expanded so that a €500,000 upper threshold on salary was removed, rules on tax residency changed, and beneficiaries allowed to work in Ireland and overseas at the same time.

It explained how a person on €800,000-a-year would have an effective tax rate of 40.1 percent instead of 46.6 percent.

It also claimed that “very few (if any)” individuals involved in the scheme would be paid a salary in excess of €1 million.

However, this prediction proved inaccurate and eighteen people earning annual wages of between €1 million and €10 million were on the scheme in 2016.

The submission warned too that any extension of the measure was not going to be universally popular.

“While any extension/enhancement of the scheme is likely to raise opposition in some quarters, we believe it can be justified in terms of helping to improve Ireland’s overall competitiveness,” it said.

A spokesman for the Department of Finance said that the abandoned 30% scheme was “one of a number of proposals that were looked at the initial consideration stage [brainstorming]”.

“This occurs when any new taxation measure is considered by officials who will always provide various options for consideration for senior management [or the] minister. The decision was taken that this particular option would not form part of the scheme.”

CHILDREN’S Minister Katherine Zappone was advised to get an Italian translation of “Is that a yes Pope Francis?” before presenting him with a letter about the Tuam Mother and Baby Home.

The Department also debated whether to refer to the Pontiff as Pope Francis or to use a more formal title like “your holiness” or “most holy father” in correspondence.

During the Papal visit in August, Ms Zappone had handed over a letter asking for reparations from the Vatican towards the excavation of the Tuam site and a suitable memorial.

Emails released by the Department reveal how the thirty-second meeting between the minister and the Pope had been carefully orchestrated in advance by Ms Zappone and her advisers.

One of her special advisers Patricia Ryan explained how they were “going to the top”.

“I think there is nothing to lose by asking him a direct question,” Ms Ryan said. “He may or may not offer a response. Even raising it with him is meaningful. It will, no doubt, be the first time that it has been raised with him.”

Minister Katherine Zappone wondered in an email whether it was “practical” to seek a direct response from Pope Francis on the Tuam scandal.

“Will that get us what we want?” she asked. “What is role of [the] Dublin Archbishop? Or, are we looking to make a more symbolic statement.”

In an earlier email, adviser Patricia Ryan said their key message would be that the church “step up to the plate”.

“Looking for a commitment on a course of action that has not yet been sanctioned by government will be risky,” she warned.

Ms Ryan also said that Minister Zappone should leave herself “room for manoeuvre” while still sending a strong message to the Pope.

Patricia Ryan drafted a short speaking note that the minister would say to the Pope when handing over her letter seeking reparations.

Ms Ryan said: “Presumably he will respond in the positive and this then opens the way for us to engage with the church at the highest level?”

She also said it would be worthwhile to get a translation for asking Pope Francis directly if he was agreeing to provide compensation if there was any confusion over his response.

In earlier emails, the minister’s press adviser Jerry O’Connor said that asking for a channel of communication to be opened was “perhaps about as far as you could go”.

He said: “To have the door opened – whether it ends [up] being through a Cardinal, the Archbishop or [Papal] Nuncio – would be a big success and allow for further more detailed engagement. It is the best possible outcome we could hope for from this very short engagement.”

Mr O’Connor also suggested it may not be appropriate to start the letter by saying “Dear Pope Francis”.

He suggested instead the use of either “Your Holiness” or “Most Holy Father” – which were “recommended for a non-Catholic when writing to the Pope”.

Minister Zappone was not fully convinced however. She responded: “May I sleep on this? I prefer dear pope Francis.”

In the end, they went with the minister’s preference of Pope Francis as internal discussions took place over whether the letter would actually be made public.

Her press adviser Jerry O’Connor said: “We also need to discuss together if and when we will be putting remarks in public domain.”

Asked for comment, a spokesman for the minister said they had nothing to add to the contents of the internal correspondence, which was released following an FOI request.