AS THE ECONOMY slowly improves the Government is beginning to consider tax strategies aimed at luring recent emigrants back to Ireland.
The coalition’s spring economic statement is due in April with the ruling parties mulling over the benefits of benchmarking Ireland’s tax system against more progressive countries according to a report in the Irish Times.
That same statement is expected to commit Ireland to reducing unemployment to zero by 2018.
Some 408,000 people have emigrated from Ireland since 2010 according to the latest CSO figures, although the rate slowed by 8% down to 82,000 for 2014.
Currently our average tax rate between income tax, universal social charge and PRSI is 51% for middle-income earners (between €33,800 and €70,000).
While exact details of the scheme are not yet known, any new system would be aimed at aping those of the UK, Australia, America and Canada.
In Australia for example, the rate of tax doesn’t differ that much from Ireland but salaries are exponentially higher.
Speaking to TheJournal.ie tax specialist at Grant Thornton Peter Vale suggested that, whatever form the tax reforms take, the Government would do well to learn the lessons of the past.
“If you take the example of SARP, that was aimed at senior executives abroad with the carrot of a 30% tax break for coming to Ireland, but Irish takeup under the scheme was miniscule because there was too much red tape,” Vale commented.
That kind of bureaucracy makes some sense as the exchequer would be rightfully concerned about making a huge loss, but there needs to be a balance. In that instance the Netherlands outperformed us under the scheme 100 to one.
Whatever form these tax reforms are to take, they have to offer something tangible else why would anyone come?
Minister for Finance Michael Noonan spoke last year about the difficulties facing middle-income earners in Ireland compared with other countries from a tax perspective.
“If you take the tax rate that a young Irish professional or a young Irish building worker pays in London, they won’t go into the higher rate until they are at in excess of £150,000 (€190,000), they go into the higher rate here at €32,800,” he said.
Ireland’s threshold for the higher rate of tax increased by €1,000 in last October’s budget, while the rate charged decreased from 41% to 40%.
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