Emigrant tax: Why reward those who left?

The Government is considering offering high-earning emigrants a lower income tax rate of 30 per cent in a bid to lure them home, Fiona Reddan reports today.

The new tax would be aimed at those earning in excess of €75,000 in specialist jobs in areas like medicine, science, IT and finance. The scheme would also apply to entrepreneurs in specialist sectors, and would remain in place for a period of up to five years.

The Irish Times asked readers in Ireland and abroad what they thought of the proposal. Below are some of the responses we received.

Carmen Spencer: ‘Why should those who left when the going got tough be rewarded?’

I graduated from college in 2009. I took a job in a call centre, acknowledging it was well below my skill set. It paid less than the job I had in my year out between secondary school and college six years prior.

I worked my way up the career ladder, working for far less than I felt my skills were worth. Once I moved into the higher tax bracket I was appalled by the level of taxation every month but accepted it. I had had the use of education system in Ireland, I received a grant, and it felt right to pay this back. I also understood that I was in a privileged financial position comparatively, I had no mortgage or debt obligations and no children. I spent my disposable income here in Ireland, on the whims of someone who is single and childless.

I know a lot of people who emigrated. I was tempted too, and sometimes felt like a fool for staying here, with the lack of liberal values in Government, high tax, and the general feeling we were on a sinking ship. Yet I stayed, despite all the tales of people in “better” places with better job opportunities.

Now the economy is recovering and there is bandwidth to make improvements in taxation, why should those who left when the going got tough be rewarded, while those of us who stayed and toughed it out get nothing?

I understand many were forced into emigrating to find work against their will, and I empathise with those people. However there is another cohort of people who emigrated out of choice; I know a good few of them too.

I recognise the possible benefit of the skills these people acquired abroad to the Irish economy if they were to return, but my issue with an “emigrant tax” is that it rewards those who left at the expense of those who stayed. A progressive approach to balancing the needs of these two groups would be to change the tax bands, increase the amount that people need to earn before hitting the top tax bracket. This would make returning home more attractive to those currently in more progressive income tax systems, as well as giving something back to those who worked and toiled and saw their take home pay decimated during the years of austerity.

Let’s stop mythologising the emigrant experience and look at the value created by those who decided to stay.

My wife, Emily, is Irish-American so emigration to the US was relatively straightforward for us. We moved over and got married in July 2013. We both had good jobs in Ireland at the time but we chose to emigrate to be closer to Emily's family in the Washington DC area.

We both work in data analytics so finding work was easy enough - we get paid more here and the tax rate is lower. Rents are higher in DC but other living costs are lower, e.g. cars, electricity, petrol. All things considered we are far better off in the US, so much so that we had little bother saving for a 20 per cent deposit on our house that we purchased in August 2015.

There are other factors keeping us in the US too. The US is more culturally diverse and the climate is more appealing than rainy Ireland. Of course missing friends and family back in Ireland is the major con but there's a seven hour direct flight to Dublin and that's not bad when you consider the 24 hours plus it takes to go between Ireland and Australia.

A lower tax rate would make a move back to Ireland more attractive but would we actually do it? I doubt it. Life is good in America for us right now. Besides the tax cut is not fair. Why offer us a tax cut and not offer it to the people who actually stayed in Ireland and worked for the economic recovery?

Anonymous, investment banking, Australia: 'It would help offset the expense of settling back'
My husband and I have been living in Australia for six years. We work in private banking and management consulting for an investment bank. Salaries are high and we pay approximately 40 per cent income tax. We consider this income tax rate very high. We are now moving to New York via an intercompany transfer for my husband. The average tax rate that will apply to our incomes in New York is approximately 31 per cent. New York is considered to be one of the highest income tax states in the US yet is significantly less than Ireland.

We would definitely be very encouraged to move back to Ireland if a reduced tax rate was available for us. It would help resolve the concerns that we have about the very high rate in Ireland and would help to offset the expense of settling back, time spent seeking new jobs etc.

The current high tax rate is a deterrent to returning, we know a couple with two children who moved back to Ireland from Australia but then subsequently returned to Australia as financially they felt very stretched living in Dublin on their after tax salaries. We know of many who have returned to Ireland and one of their biggest complaints is the high tax rate; many regret or doubt their move.  This negative experience of many returned emigrants has been a big eye opener for us and our friends here who consider the high income tax rates in Ireland as very discouraging for those of us who would like to relocate back to Ireland.

Gavin Kelly, financial services, Dublin: ‘If they wish to call Ireland home they must pay their fair share’

I would be strongly against the proposed inequality of a two-sided tax system. While I agree measures need to be implemented in order to attract back emigrants, why does it have to be done to the detriment of existing tax payers? Existing tax payers already have enough on their plate with high effective tax rates coupled with outrageous rental costs and/or high residential property prices, childcare costs and other indirect taxes, most of which has gone to benefit the state as a whole. The lay man on the street will tell you that they are not seeing any benefit in their pockets from the “recovery”.

By charging a reduced tax rate for emigrants, the difference in what should be paid will be effectively picked up by the remaining taxpayers. Are we happy as a society for those on lower to middle incomes of under €70,000 to effectively subsidise or reward emigrants earning €75k,000 who more than likely have not directly contributed to the restoration of the economy? Our Government harps on about how we have one of the most progressive tax systems in the world (and I wouldn’t wholly disagree), but this is a classic example of regressive taxation. Which one is it folks? Why should a historic cohort of society (as they are not currently working in our society) reap any of these benefits ahead of people who have stuck through thick and thin?

What guarantees do we have that they will remain in Ireland past this five-year period and pay the same tax as the general public? None, so why would we as a country take this financial risk? If these individuals are only willing to return on a reduced tax rate, history will tell you they will as quickly leave once tax rates are brought in line with the general public. With housing stock levels so low, this will inevitably lead to increased and unfair (by comparative net disposable income) competition in the housing market. Those who have been saving tirelessly whilst also paying high taxes will be required to continue to do so to compete with emigrants.

I am very much in favour of getting emigrants back to Ireland. But if they wish to call Ireland home and wish to come back to live their lives in this wonderful society, then is it too much to ask they pay their fair share?

Piaras Mac Éinrí, Associate Dean for Internationalisation at University College Cork and author of the 2013 Émigré survey of post-2008 emigration: ‘It is a slap in the face to tens of thousands who left’

I cannot think of a more unfair and divisive proposal, a slap in the face to tens of thousands who left with little more than the proverbial shirt or blouse on their backs. And it provides Fine Gael with a prospect of a future cohort of "their" kind of voters. You can see them thinking "what's not to like"?

Alexis Fitzgerald, another Fine Gael luminary, wrote in a dissent view about emigration back in the in the mid-1950s that “I cannot accept either the view that a high rate of emigration is necessarily a sign of national decline or that policy should be over-anxiously framed to reduce it... In order of values, it seems more important to preserve and improve the quality of Irish life...than it is to reduce the numbers of Irish emigrants...High emigration, granted a population excess, releases social tensions which would otherwise explode and makes possible a stability of manners and customs that would otherwise be the subject of radical change.”

Now Fine Gael has come up with a way of complementing this approach - keep the undesirables away but let’s bring back our sort.

We should facilitate emigrants wishing to return home but not in this way.

Kieran Bourke, financial risk management, Singapore:  'It would make Ireland one of the most competitive income tax environments in mainstream Europe'
I left Ireland in 1993 at the age of 25 and have not returned to work in since. My perception of the Ireland is that of a low salary / very high income tax economy and for these reasons (among others) I have never had a desire to return.

At one point or another in my career I’ve lived in Canada, South Africa, London, and most recently Singapore. I have worked with major global banks. When I re-enter the employment market the factors that will drive any location decision will be (i) availability of a suitable position, (ii) after tax income, (iii) lifestyle factors.

The proposal of a cap on income tax at 30 per cent will be very attractive to high earning people potentially interested in relocating to Ireland. It would make Ireland one of the most competitive income tax environments in mainstream Europe and, having factored in lower living costs, the gap with places like Singapore (22 per cent income tax) and Hong Kong (15 per cent income tax) would be drastically reduced for moderately high income earners (ie those with incomes of less than say €400,000).

With the UK about to leave the EU the likelihood is that a number of highly paid financial services jobs will relocate to Ireland. This proposal would increase Ireland’s attractiveness.

Then there’s the million dollar question as to whether the proposal is fair to existing Irish taxpayers who remained in Ireland. It plainly is not fair, but tax is very difficult to make fair anyway. One person’s perception of fairness is another’s perception of theft. If one looks at the proposal pragmatically: (i) it is certain to increase tax revenues to the Irish exchequer which in turn will (2) ease the tax burden on  everyone else.

Alan Kennedy, teacher, United Arab Emirates:  'Ireland seems to only care about those who are high income earners'
I've been working as a teacher for almost five years now in the UAE. But like all teachers who have left Ireland, I would love to be able come back home.

Unfortunately I will not fall into the income range that is been suggested for a tax break incentive to return home, like the majority of emigrants who have packed their bags and left both family and friends in recent times. Ireland seems to only care about those who are high income earners and less about the everyday working class .

Daniel O’Connell, retired company executive, Dublin: ‘There is enough inequity in Irish society as it is’

The only fair and equitable way to deal with this issue is to have the tax rates apply to all employees in Ireland and cut out any suggestion of one rule for one sector. There is enough inequity in Irish society as it is, we do not need to add to it.

I have lived abroad for most of my working life, where I have experienced other taxation systems. The Irish tax system is unfair and penal for those earning above a certain threshold, as demonstrated very clearly in a recent study by the Irish Tax Institute, which showed high earners pay much more tax here compared with our near neighbours in the UK.The system needs a third rate of tax, and higher entry thresholds. This system must be shared by all taxpayers; no special incentives would be necessary then to attract back Irish workers from abroad, or bring in non-Irish workers. Basic restructuring of our housing market, greater measures to control crime particularly in urban areas, and a better internet infrastructure are three urgent matters needing attention to help make Ireland a more attractive and safer place for all to live and raise a family.

Stephen Connolly, accountant, Dublin:  'Tax-free relocation grants would be fairer'
I worked abroad for three and a half years in the 1990s, so I'm familiar with the challenges coming back to Ireland and having to seek work.

For persons resident in Ireland, a differing tax rate applicable to those returning from abroad is absolutely not fair to others resident in the country.

Recognising that many of those who have emigrated were forced to do so by economic necessity due to lack of employment, those remaining have contributed to the recovery through salary cuts and increased tax cuts.  It would be grossly unfair to discriminate against those people by offering reduced rates to those returning.

Other incentives such as tax free relocation grants / payments offered by employers would be fairer. Short term accommodation rental tax reliefs could be looked at also.