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AmCham call for income tax overhaul

Thursday, May 15 13:56:46

The American Chamber of Commerce Ireland today called for urgent reform of Ireland’s personal taxation regime.

Speaking at the Chamber’s Spring Lunch today, Louise Phelan, President of the American Chamber said that the mood among its members – who rank among Ireland’s top employers - is one of optimism, despite the global competitive environment in which they are operating.

“The single biggest challenge for Ireland Inc. and for our members is creating conditions which support the creation and retention of jobs. Personal Taxation is an important issue in this regard,” she said.

“As employers of 115,000 people in Ireland, American Chamber member companies are very aware of the high burden of taxation on their employees. Our role as employers is to support our most important asset – our people and it is in this context that we are calling for reform of the personal taxation regime”, she said. “The high marginal tax rate and the low entry point to that rate are major barriers to attracting and incentivising key talent which must be addressed. Widening the tax bands would reduce the income tax burden on all PAYE workers and would stimulate badly needed economic activity in the domestic market”.

Ms. Phelan also called for the Government to look at the issue of ‘gainsharing’ - measures which would address allow companies reward employees in a tax efficient manner for achieving productivity rates over and above agreed targets.

“Higher productivity is a prerequisite for a sustained return to growth and to job creation. If companies are willing to set high performance targets for their businesses and share the fruits of that performance with their employees, then there will be benefits for Ireland, those businesses and the employees. The tax system should be used as an incentive to kick-start this concept on a wider scale. The application of such a system to a wide group of employees can only be good for the economy as a whole."

Ms. Phelan said the impact of personal taxation on Ireland’s competitiveness, on investment decisions and on our ability to retain and attract talent must be recognised.

“The additional impact of high personal tax rates is to raise costs for companies as they try to compensate for this tax burden. We also know there are issues with attracting and retaining skilled employees to Ireland because of the high personal taxation rates. The National Competitiveness Council has stated that the cumulative effect of increases in income taxes, changes to bands, the introduction of the USC and other new taxes, has been a loss of competitiveness in attracting jobs.”

“We have made some important strides in addressing issues impacting on our ability to attract talent. The introduction of changes to work permit legislation is welcomed. We also welcome the decision to review the Special Assignee Relief Scheme as it will allow us to ensure that our offering in this area is at least as good, if not better than that offered by other countries. Reforming the personal taxation regime is another important step,” she added.

Ms. Phelan called for a clear roadmap in the forthcoming budget on personal taxation reform in order to restore lost competitiveness. “We welcome the indications by the Minister for Finance that tax cuts may be feasible in the next Budget which will help Ireland's competitiveness and improve its attractiveness as a location for FDI. The potential dividend is great - putting our economy on a stronger footing with increased employment and investment; greater spending in the economy and sustained economic activity”, she said.