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Irish Accountants Welcome PAYE Ruling

by Jason Gorringe,, London

01 October 2007

The announcement in late September by the Irish Revenue Commissioners that they are prepared to allow cross border workers to earn money in the Republic without double deduction of PAYE has been welcomed by the Institute of Chartered Accountants in Ireland (ICAI).

As an all-island organisation, ICAI had been advocating to Revenue a practical approach in applying new tax rules for employees which came into force last year.

“While the new Irish law hit workers from all countries coming to work for short periods of time in the Republic, it was of particular concern to Northern employers needing to send people on secondment to the South. The new approach by the Irish Revenue comes after months of discussion with ICAI (as part of CCAB-I), and other interested parties. It represents a sensible balance between Revenue’s legitimate concern to ensure its tax base, while recognising the increasing economic links between North and South in the context of the all-island economy” said ICAI Director of Tax, Brian Keegan.

Since new tax rules came into force in 2006, all employees working in the Republic became subject to Irish PAYE, even if they were already paying PAYE in their home country. Now, provided some reasonable conditions are met by their employers, workers on assignments of up to six months in the Republic will not be liable for Irish PAYE. Employees normally living and working in Northern Ireland will pay PAYE as usual under the UK tax rules, provided their spell of employment in the Republic does not exceed six months.

Less fruitfully, the ICAI has also been lobbying for the introduction of a reduced corporation tax rate in Northern Ireland to a level of 12.5%, being the same as the rate applicable in Ireland.

In a submission to Sir David Varney, ICAI rejected criticisms that a low corporation tax rate encourages tax avoidance and results in artificial tax planning. The submission contained an analysis of how these pitfalls have been successfully avoided in the South, where low corporation tax rates have prevailed for several years. The submission also offered a roadmap of how a lower rate could be introduced without contravening the EU Treaty. ICAI points out that Portugal was supported by the UK Government when it attempted to introduce a special low tax regime for the Azores.

The submission concluded by noting that international experience would suggest that a low corporation tax rate usually boosts Exchequer receipts overall, because of greater contributions from VAT and payroll taxes arising from increased economic activity.

ICAI says it is in an excellent position to comment on the technical aspects of tax policy because it is an all-island organisation with first hand experience of the tax regimes North and South of the Border.

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