Budget 2017: A most reassuring budget for the big multinationals
The big issue on what supports he would offer to exporters reliant on the UK market, who are facing upwards of 18% erosion in their profit margin due to the fall in the value of sterling since the Brexit, was effectively dodged.
Fianna Fáil finance spokesperson Michael McGrath — speaking after the budget — summed it up succinctly with his comment the “package was pathetic”. And many exporters will agree with his comment that without strong government support they “will simply not survive”.
His call for a national hedging strategy is innovative and essentially what indigenous exporters need, according to the Irish Exporters Association in their pre-budget submission. But also the paltry added fund allocation to both Enterprise Ireland and Bord Bia did nothing to reassure those on the rough end of currency losses they would receive any major assistance to move into other markets.
Perhaps some solace will be taken from the fact the minimum wage and tax bands were not affected this time around, a major concern of all the business groups. For employees in exporting companies large and small, the minister brought in an unexpected, but welcome, change to the foreign earnings deduction — which gives relief for “significant amounts” of work done in foreign countries. This has been changed to reduce the minimum number of days required to be spent abroad from 40 per year to 30.
However, multinationals will see this as a very positive budget with reaffirmation of the Government’s commitment to “play fair but play to win”, with the cornerstones of Ireland’s tax policy — a transparent regime built around the 12.5% rate, and valuable reliefs that encourage innovation — remaining intact.
The trend in corporate tax is now becoming clear: In the future, more profits will be taxed where key decisions are taken and where key people are located. The tax strategy of MNCs will need to be more transparent, and bedding down the new system will lead to more cross-border tax disputes, including the recent Apple case. Hence, the minister’s decision to extend added funding to bolster the staffing in Revenue is a sensible move to support this.
But perhaps the most significant move for hard-pressed chief executives trying to pull in the best international talent to Ireland will be his announcement of the extension of the special assignee relief programme (SARP) to 2020. Amendments to SARP, since its introduction in 2009, have made the regime more accessible to individuals coming to Ireland. But other regimes in Europe, such as the Netherlands, offer more attractive benefits and last longer, which can make a big difference to key employees being asked to move here.
The final details will be in the Finance Bill and hopefully include an increase to the five-year claim period, a reduction in the income threshold from €75,000 and an extension of the relief to cover PRSI and USC.
