The Government should expand a controversial tax break for multinational executives to keep the Republic’s lucrative aircraft leasing business flying, accountants say.
The State this year extended the Special Assignee Relief Programme (Sarp), which gives tax breaks to multinational executives moving to the Republic on pay of €100,000 a year or more, despite stiff political opposition.
But in a new report, the Government has been urged to broaden the tax break again to help boost the aircraft leasing business, which it calculates is worth almost €900 million a year to the Republic.
Taking Flight 2023, an analysis of the Irish aircraft finance industry by accountants PwC, says the State should extend the tax break to seven or nine years from its current limit of five.
The report recommends broadening its terms to include newly-recruited staff to allow Irish-based operations lure executive workers here from other firms overseas.
The accountants argue that executives should also be exempt from PRSI and the universal social charge while they say Government should consider extending it further to cover costs such as accommodation.
Additionally, PwC says the qualifying salary for the relief should be cut to cater for “more junior but critical employees”.
It claims that applying for and reporting the tax break is “impractical, onerous and cumbersome” and that the State should streamline these processes.
Paschal Donohoe, then minister for finance, capped the salary qualifying for the tax break at €1 million in 2018 after it emerged that the cost per executive job supported had trebled to €73,000 from €23,000 in 2017. His predecessor Michael Noonan had scrapped a previous upper limit of €500,000, a move officials believed drove up the scheme’s cost.
The overall cost fell €4.2 million to €38.2 million in 2019 following Mr Donohoe’s reintroduction of a salary cap, while the cost per job slid to €44,000.
Nevertheless, the scheme continued drawing political fire on the grounds that it was a tax break for highly-paid workers.
Reports last year claimed Sinn Féin planned to abolish it, prompting Minister of State Robert Troy to warn that doing so could lead to the loss of thousands of jobs in the Republic.
The executive tax break scheme dates back to 2012 when the then government was keen to boost investment in the Republic, which was going through a long recession sparked by the collapse of its banks and property market.
Mr Noonan axed the original €500,000 cap in a bid to lure “key decision makers” to the State.
PwC warns that the high cost of doing business in the Republic now ranks as the biggest threat to the €900-million-a-year aircraft leasing business. Responses to a survey highlighted “the cost of housing and the cost of living which is driving pay demands to unsustainable levels”, says the report.
Aircraft leasing employs 8,543 people directly and indirectly in the Republic, 71 per cent more than the 4,970 calculated when PwC last surveyed the business in 2018.
Lawyers, accountants and consultants are the biggest beneficiaries of industry spending, mopping up $129 million (€119 million) annually in professional fees from aircraft lessors based in the Republic, the report shows.
Lessors combine their own cash with debt to buy aircraft from manufacturers, mainly Airbus and Boeing, which they lease to airlines around the world.
The world’s three biggest players – AerCap, Avolon and SMBC Aviation Capital – are based in the Republic, which is a key centre for the industry.
