Any multinational financial services firm could attract somebody here with a special tax break, without the desired effect of creating any real jobs
New measures aimed at attracting foreign executives formed a major plank of the business offering in last week’s Finance Bill. Known as the Special Assignee Relief Programme (SARP), the measure has been widely welcomed, but does have a few inevitable flaws.
Under the scheme, existing foreign employees of a multinational firm can transfer to the Irish operations of that firm and benefit from special tax relief, which exempts 30 per cent of salary from income tax. But some experts believe the confining clauses of the package will make it too restrictive, while critics believe it will simply end up reaching too far and be too broad. In a television interview last week, finance minister Michael Noonan explained that the idea for the measure had come from IDA Ireland.
He envisaged a scheme where leading people in foreign multinationals could come to Ireland and help build jobs around them. Noonan referred to R&D and the kind of talented specialists who might be able to avail of the scheme, enhance their earnings by coming here and leading a team of people.
There is no doubt that the scheme will help those kinds of fields. But the legislation is not restricted to roles in companies that lead to job creation. Neither is it confined to R&D or software development. In fact, it applies to any business in any sector where the foreign executive comes to Ireland and earns between €75,000 and €500,000 per year.
So a multifunctional services firm – like accountants, or lawyers or a bank – could attract somebody here with a special tax break, even though they may not create any real jobs.
The counter-argument is that, once a multinational firm is going to invest in sending or bringing somebody to Ireland, and all of the expenses that goes with that, it will inevitably expect higher profitability and growth of the Irish operations of the company in some way. Therefore, the measures can even indirectly – as well as directly – help with creating jobs.
Irish people working for multinationals abroad will not be able to use it to come home. Not only must the persons be living outside of Ireland for five years, but also they must be domiciled outside of Ireland. This will make it very difficult, but not impossible, for Irish emigrants to come back using this scheme.
One significant barrier to the success of the scheme is the insistence that the foreign executive, who comes to Ireland and benefits from it, cannot spend more than 30 working days a year outside of Ireland.
This could be a major stumbling block, as many of the prospective candidates who might be attracted by the scheme, are likely to spend a lot more time than that travelling abroad.
This 30-days stipulation is likely to have been included to prevent any kind of abuse of the scheme where individuals locate to Ireland for the tax relief, but in fact spend most of their time outside the country.
However, the stipulation may well be the subject of lobbying from various groups and it could be amended.
The primary aim of SARP measure is to attract talented wealth and job creators, in a way that levels the playing of the pitch with other countries. Software companies, with lower grade operations in Ireland, could see it as attractive in enticing programmers and researchers to Ireland. One area where this makes a lot of sense is the computer games industry.
This sector already employs a lot of people here, both in multinationals and indigenous firms. But much of the work done by multinational games companies is not software development. In other words, they perform various functions in Ireland, but hotshot creative software developers make the games somewhere else.
“Ireland has become the European hub for online games, with major players such as Zynga, Popcap, Big Fish Games and Activision Blizzard all establishing a presence alongside the euro HQs of Facebook, Microsoft and Google,” according to Paul Hayes of industry association Games Ireland.
“If we want to attract and win more projects from the companies already here, we have to incentivise the overall package. This is not limited to executive pay, R&D and corporation tax. They help, but it is a good headline way to start and get noticed. It is what Canada did eight years ago and jobs flowed there from France. We can’t offer everything Canada did, but we can be the Canada of Europe,” he said.
“Attracting key talent who have done it before is vital. These are job makers, not job takers. These project move fast but grow fast too. Look at Angry Birds or Farmville, 500 million new gamers in the last two years alone, yet it took 30 years to get the first 500 million."
By late last week, there were tentative signs that the new measure had generated at least some interest. According to migration experts, VisaFirst, there were enquiries from businesses in the days following the Finance Bill where companies were interested.
The SARP measure is likely to attract all kinds of executives in sectors for which it was never intended. However, if it brings in real talent, in reasonable numbers, whose skills are simply not plentiful here, it will be success.