Irish Government’s special tax rate for returning emigrants with prized skills could also unlock CGT reform.
Highly skilled Irish citizens who opt to return home could be in line for a special 30pc tax rate, as well as the ability to buy company shares.
It is understood that new plans being drafted by Jobs Minister Mary Mitchell O’Connor, TD, are part of a bid to make Ireland more competitive in the post-Brexit world.
‘Emigration is a persistent problem and we should continue our efforts to stem that flow’
– JOAN MULVIHILL
The new plans, which may be revealed on Budget day (11 October), could also be an important lever in pushing Ireland to revise its outmoded capital gains tax (CGT) rules.
Under current rules, if a company awards shares to an employee, that employee is instantly pummelled by a tax bill.
However, the new rules being drafted by Minister Mitchell O’Connor, TD could see returning emigrants not pay CGT until they divest their shares.
It is understood this will bring Ireland in line with the UK, which has a more forward-looking structure for CGT and support for start-ups.
In recent months, Siliconrepublic.com reported that the Irish Government is planning to cut the rate of CGT for new start-ups to 10pc with a €10m cap on gains from next year.
However, entrepreneurs and investors have been quick to describe this as a cop out, as it doesn’t really cover existing start-ups and their employees – only new ones.
Either way, it is a step in the right direction, and allied with a special tax rate for returning emigrants, it could bring outmoded CGT rules into the 21st century.
Far-sighted reform first proposed by IIA chief executive
One person who will be delighted with the proposed new tax rules will be Irish Internet Association CEO Joan Mulvihill, who campaigned for such a reform in 2011.
In a policy document published in 2011, the IIA’s programme specifically included a blend of tax credit, PRSI waiver and/or repatriation grant to attract skilled workers back to Ireland. This was to reduce their effective rate of tax and provide greater incentives to take up roles in the country.
Mulvihill welcomed the proposal but warned that the Government needs to be mindful of those who stayed the journey and paid their taxes in Ireland through seven years of blistering austerity.
“Naturally we are delighted by the decision of Minister Mary Mitchell O’Connor to pursue this policy which we have always believed to be based on sound economic principles, as well as being a pragmatic and meaningful way of attracting home our skilled emigrants,” Mulvihill said.
“However, we are of course disappointed for those who chose to stay and who have committed their talents, skills and careers by sticking it out over the past seven years of austerity.
“It is an unfair blow to them that their commitment is not equally rewarded. Ideally, we would like this tax incentive to be applied, if even only in part, to those who are currently working here so that they will equally be incentivised to stay. Emigration is a persistent problem and we should continue our efforts to stem that flow.”