The Department of Finance rejected a proposal to double the length of time a generous tax incentive applies to executives from multinational companies.
Minister Paschal Donohoe was also discouraged from extending another tax relief scheme for top executives amid fears it could create a “significant loophole”.
In a budget submission, Mr Donohoe was briefed on a plan to allow senior personnel benefit from 10 years of a special tax scheme instead of the five years currently available.
Under the arrangement – known as the special assignee relief (Sarp) – 30% of income above €75,000 is exempt from income tax. Those who benefit are also allowed a €5,000 per child tax-free allowance for school fees, if those fees are paid by their employer.
A submission explained how the Department of Business had asked for the extension to “facilitate the attraction and embedding of mobile investment and high calibre individuals”.
It explained: “Where an individual transfers from a jurisdiction with a lower effective tax rate than Ireland, the employer would often have to increase the salary payable in order to ensure [the employee] … did not suffer a loss.”
Extending the scheme, which was introduced in 2012, would mean employees who came to Ireland expecting only five years of relief would now have double the benefit.
The submission explained that take-up of the scheme was growing dramatically. In 2013, only 121 employees benefitted at a cost to the exchequer of €1.9m. By 2015, 586 people were getting the incentive at a cost of €9.5m. The submission also opposed another change proposed by the Department of Business where some highly qualified individuals already based in Ireland could benefit if their “required key skills are not available within the Irish labour market”.
Mr Donohoe wrote: “I agree to this evaluation … and will not go ahead with these proposals.”
He also ruled out a second change proposed by the Department of Business to another tax incentive for executives.
The Foreign Earnings Deduction scheme allows a tax write-off of €35,000 on income tax (excluding Prsi and USC) for employees who travel to certain countries for their work.