The Government is facing a potential threat to some of its corporation tax revenues because people who worked remotely from abroad for Irish-based firms during the pandemic are refusing to return to the State because of the housing crisis, senior business figures have warned.
Amid concern about the Republic’s growing reliance on volatile business taxation, the housing question is emerging as a significant issue for some of the global companies behind a surge in exchequer payments.
When travel restrictions were imposed during the pandemic, companies received Revenue concessions to allow hundreds of non-Irish staff to work remotely in their home countries. This policy shift meant the State continued to collect tax on the profits generated by people working in other jurisdictions.
The Revenue withdrew the coronavirus concession in January as the pandemic situation eased, prompting companies to direct staff to resume working in the Republic. But many workers have remained abroad, saying they could not return because of the rising cost and shortage of housing in the Republic.
Cutting off family members: ‘It had never occurred to me that you could grieve somebody who was still alive’
The bird-shaped obsession that drives James Crombie, one of Ireland’s best sports photographers
The Dublin riots, one year on: ‘I know what happened doesn’t represent Irish people’
The week in US politics: Gaetz fiasco shows Trump he won’t get everything his way
Companies are now grappling with whether profits attributed to work in other countries are taxed in those jurisdictions, reducing the tax paid in Dublin.
“The net effect is Ireland will [be] down money,” said Cormac Kelleher, international tax partner with accountants Mazars, who added that certain Irish-based groups had “sizeable” numbers of staff working in other countries.
“You now have employees in France and Germany and Spain and all the rest of it. There are branches there and you’re going to have to attribute a chunk of the Irish profits to those jurisdictions and you’re going to have to pay corporation tax in those jurisdictions.
“Under basic rules Ireland — when it’s doing the tax calculation — will have to give a credit for the tax suffered in the other countries.”
Eroding tax revenues
A second accountant, speaking on condition of anonymity because of dealings with international companies, said other countries were likely to examine the issue because some Irish-based groups were already paying social security in other jurisdictions for their workers.
“At some point, foreign revenue [authorities] are going to start trying to join the dots,” the accountant said. “It’s a problem in waiting. There certainly will be questions asked in these foreign countries if these practices continue.”
The Republic’s corporation tax revenues have been advancing rapidly, with €13.8 billion collected in the first nine months of this year. That return was €5.8 billion greater than in the same period in 2021, itself a record year. The overall return last year was €15.3 billion, with the largest 10 companies paying 53 per cent of the money.
A senior business figure familiar with the discussions in large companies said the housing crisis now risked eroding tax revenues because of workers staying abroad.
“It’s reasonably large numbers of employees but centred in companies that are our biggest corporate taxpayers and we already know that the corporate tax base is very concentrated,” they said. “It could have significant implications for the exchequer. It’s another compelling economic reason for fixing the housing market quickly. It’s moved long past an affordability crisis to an extreme availability crisis. Two years ago it was hard to get. Now it is for many impossible to find somewhere to live.”
The Revenue said it had “no plans” to introduce any further concessions, saying pandemic measures were introduced because of strict travel restrictions.
“The position with regard to the housing situation is very different from that which the Covid-19 crisis caused. There are currently no Government restrictions preventing travel into and out of the State,” the tax authority said.
The accountant said any question of another Revenue exemption was irrelevant and that the Irish authorities could be left as “innocent bystanders” if other countries insisted on imposing corporation tax in respect of profit they ascribed to people working in their jurisdictions.