The Department of Finance has advised against the introduction of a scheme which would allow Irish tax exiles to spend more time in Ireland for a substantial lump sum payment.
The department's secretary-general John Moran has stated that a scheme put forward by Kieran McLoughlin, chief executive of the Ireland Funds, and Frank Flannery, chairman of the Government-backed Forum on Philanthropy, might be perceived as allowing wealthy individuals to buy "their way out of tax residence". Their scheme – which is under consideration for inclusion in next week's budget – would involve tax exiles or Irish citizens giving a €5 million lump sum to either a social entrepreneur fund or for investment in business.
Super tax levy
In addition they would be required to make a payment of a new annual super tax levy of €1 million for 10 years. In return they would be allowed to spend 183 days in Ireland every year. At present they are allowed a maximum of 280 days spread over two years. It would amount to the equivalent of an extra 43 days or just over six weeks a year. Mr Flannery and Mr McLoughlin raised the issue with Taoiseach Enda Kenny and Michael Noonan last year and Mr Kenny asked the Department of Finance to consider the scheme.
'Residency rules'
Mr Moran wrote to John Callinan, assistant secretary at the Department of the Taoiseach, stating it was "not advisable" to introduce it and it could amount to "hollowing out the residence rules for tax purposes without an indication that anybody would participate in the scheme". The letter has been obtained by The Irish Times under the Freedom of Information Act.
Mr Flannery said yesterday he already knows 10 high-worth individuals who are prepared to sign up to it with a potential €150 million “windfall” to the State. He believes he could get 30 individuals in a short time with a potential 400 in total bringing €7 billion into the economy over the next decade. “I know that next year I would be able to deliver a minimum of €200 million into our system through this scheme and I would back myself to get in €500 million over time,” he said.
He said the idea is also liked by Mr Noonan who he met last week to clarify some of the issues, though he stressed he did not know if it would be in the budget or Finance Bill.
The proposal met with fierce criticism when it was floated at the Oireachtas Committee on Finance last July, particularly from Labour TD Kevin Humphreys who said it was "stomach churning". Mr Humphreys said he was aware of intensive lobbying this week in relation to the issue and he said the public would be "extremely angry" about it. He estimated that the sums involved could only be paid by the 44 most wealthy tax exiles many of whom are reaching the age when they want to spend more time in Ireland.
"If they are so fond of Ireland, let them come back to Ireland and pay their taxes here."
'Philanthropic cliff'
Mr Flannery said the "philanthropic cliff" which will occur when the One Foundation and Atlantic Philanthropies close down will leave a €50 to €60 million annual hole to be filled. In the absence of any changes to tax residence, he said this was the most effective way of replacing both funds.
“The alternative is to close schemes in disadvantaged communities all over Ireland putting charities out of business all for what I would describe as ideological bullshit,” he said.
“These fellows [tax exiles] are getting away with murder in my opinion and we’re not asking them to do anything.”
