CAI Comments On Irish Finance Bill
Tuesday, February 9, 2010
Chartered Accountants Ireland (CAI) has welcomed provisions in this year’s
Finance Bill that will enhance Ireland’s attractiveness to international
investors, and also empower the Revenue Commissioners with greater powers to collect
taxes and enforce Ireland’s tax laws.
Of the measures, introduced by the bill, CAI welcomed in particular changes
to the Corporation Tax regime. The body’s statement
said: “[These changes] will make it easier for multinationals to locate
their headquarters, their research departments and their patents and copyrights
here. The financial services industry located primarily within the IFSC (International Financial Services Centre) will
benefit from changes to modernize the tax rules governing the investment of
The CAI also lauded the introduction of further Islamic Financing Arrangements:
arrangements which are compliant with the principles of Shari'a law don’t
feature the making or receiving of interest payments. This means that there
are different structures put in place to provide investment, financing and insurance
services. Where possible, the Irish Revenue have applied tax to Islamic Financing
arrangements as if they operated along the lines of equivalent Western models.
The new rules in today’s Finance Bill will formalize these tax treatments.
They should enhance Ireland’s ability to attract Islamic Financial Services
providers to the IFSC, while at the same time facilitating the provision of
services to our Muslim population.”
“A key element of any inward investment strategy is the network of Double
Taxation Agreements, and Ireland needs to arrange more Agreements with Muslim
states,” the CAI stated. Ireland recently concluded an agreement
with Bahrain, and agreements are at an advanced stage with countries such as
Kuwait, Saudi Arabia, United Arab Emirates and Egypt.
Turning to discuss enforcement powers granted to the Irish Revenue Commissioners
under the bill, the CAI commented:
“Revenue are granted significant additional powers of investigation,
collection and enforcement across all tax heads. It must be remembered that
Ireland already has very high levels of tax compliance by international standards.
Tax evasion is not in anyone’s interest.”
“But businesses exist for purposes other than to act as taxpayers and
tax collectors, and the new powers being granted to Revenue must be used sensibly
and sparingly. Otherwise, the cost of tax compliance for compliant businesses
will be too high,” the body warned.
Lastly, turning to discuss income tax proposals in the bill, the CAI reflected
on restrictions to tax reliefs for high earners.
“The measures in the Finance Bill to increase the effective rate of income
tax for those benefiting from reliefs to 30%, and to change the entry point
to the restriction to EUR125,000 with the full restriction applying at EUR400,000
in effect represents the elimination of the use of tax reliefs and incentives.
It had been government policy to promote tax based investments, but the promised
tax benefits are now heavily restricted.”
“Our research shows that taxpayers in the higher income brackets pay
on average an effective rate of 30% anyway before these changes. As many of
the reliefs which are restricted are based on property investment, one of the
main effects of this change will be to reduce an individual’s capacity
to pay back borrowings. This is an unwanted consequence especially in the light
of the problems in the banking sector.”
Commenting on the New Domiciles Levy, the CAI said: “The levy will be
a EUR200,000 a year charge for individuals with Irish assets worth EUR5m and
annual income of EUR1m, but the question remains as to how Revenue can enforce
it. Ireland’s tax residence rules may require modernization – they
predate electronic commerce and our modern communications network, and the Commission
on Taxation suggested ways in which this could be done. Re-introducing the concept
of domicile (which depends for example on where you want to be buried) as the
basis for a significant tax charge is not the way forward.”
Concluding, the body welcomed changes to the tax payment and filing system
for Capital Acquisitions Tax – observing that it has been brought more
in line with other self assessment taxes – but noted that many taxpayers
may be disgruntled by other changes to the tax law, which will mean that tax
will now be due on the transfer of family businesses where the value exceeds