Finance Bill 2012 - Job creation the primary objective

Finance Minister Michael Noonan yesterday published the Finance Bill, 2012, to give effect to the taxation measures announced in December’s budget.

As a result its changes were well flagged and there were essentially no surprises.

The primary purpose of the budget was to support job creation, both in the short term and in the long run, according to the minister. The ultimate aim is to help to reduce the budget deficit in order to generate a sustainable economy and regain our fiscal autonomy.

A new Special Assignee Relief Programme (Sarp) has been established to reduce the cost for companies to attract skilled individuals from abroad to take up positions in Ireland. The scheme would provide a tax exemption of 30% of salary income between €75,000 and €500,000 for employees assigned here from one-to-five years. Those people could head up new divisions within companies in this country, or help to organise new product lines.

People invariably become uneasy when a minister provides benefits for the more affluent segment of society, such as those earning up to half-a-million a year, but the real focus of this initiative is to provide employment. As such, that aspect of the Finance Bill should be welcomed, but there should be measures of success, such as the number of jobs created, tied to the benefits.

Sarp could help to generate business and jobs. Other countries with which we are competing for investment have similar incentives, and these could be a major influencing factor for foreign companies in deciding where to base new lines of development.

The Finance Bill includes tax credits to encourage research and development in the hope of providing new jobs. There are also targeted benefits for small and medium-sized enterprises, not only to generate employment, but also to sustain existing jobs, which is vital in the current economic climate.

Mortgage interest relief of up to 30% is to be provided for first-time buyers who bought homes from 2004 to 2008. On the other hand, the legislation will close a couple of tax avoidance schemes in which people were able to become temporarily non-resident and avoid tax on benefits from an offshore trust.

There are also measures to provide extra investigative powers to Revenue dealing was suspected tax fraud, especially in the area of customs and excise in relation to such things as oil laundering and cigarette smuggling. In dealing with crimes that are punishable by five years or more in jail, the Revenue will be given powers similar those given to the Criminal Assets Bureau under the Criminal Justice Act. They will be empowered to demand individuals produce documents and records.

The legislation is designed to have long-term impact, so while the devil may be in the detail, it will be some time before its real impact can be properly evaluated.