For years the Irish government of the day would do just about anything to attract inward investment. Part of this involved tweaking and adjusting the tax rules in response to lobbying from the foreign direct investment (FDI) community and their advisers – the big accountants and law firms.
Over the years hosts of changes have been made, and governments have gone out of the way not to upset any of the big international players. Even when the controversial double-Irish tax relief was abolished in 2014 for newly located companies, those using it already were given until 2020 to phase out their use.
There were a few further nods to the FDI lobby in this year’s budget, notably the extension of the so-called Special Assignee Relief Programme, or SARP, which offers a special low income tax rate to executives locating here to work in many companies, subject to various restrictions. Under the scheme executives can claim to have 30 per cent of their income over €75,000 disregarded for income tax purposes. The scheme is now being extended until 2020.
There is no small irony here given the Taoiseach’s dismissal of the idea of a special low tax rate for returning Irish emigrants.
However, there can be no doubt that the moves in relation to tax on section 110 funds and on Irish real estate funds were a change of approach. Driven by political pressure, the Government pushed further in closing off the availability of the reliefs than accountants and lawyers had wanted.
In some cases those who have already invested in property assets here on the basis of the old rules will feel they have been short-changed. As a number of professional advisers put it, the rules are being changed half way through the game.
It’s not that Ireland does not need FDI any more. It’s more that the political mood both here and internationally has changed.
Look at Britain, where the financial sector is now feeling distinctly unloved by Theresa May’s government as it feels its interests are not being sufficiently addressed in the move to Brexit.
It may be as sign of things to come. Business in Ireland was used to getting its way at budget time. In future it may have to take some budget-day knocks as well.
