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Why Ireland must act to retain its competitive advantage in the international jobs market

Reducing processing times for people coming to work here and improving our personal tax system are just two ways to ensure that Ireland can compete

In a post-pandemic world, with more options around where staff can work, how we attract and retain talent from different countries will be a key factor in driving Ireland’s economy forward.

Ireland has historically attracted a multi-cultural and diverse workforce due to the fact that many companies operate their EMEA headquarters from Ireland. For example, Meta has reported that they have over 120 nationalities working for them in Ireland, which is astonishing diversity.

However, many companies are beginning to offer hybrid and remote working options with some multinationals offering international remote working. There are now frequent stories of firms struggling to find the requisite people based in Ireland, or to attract from overseas.

This could have significant consequences for foreign direct investment into Ireland. The State needs to improve - or remove - the barriers that exist for people moving to Ireland, or for those based in Ireland who can now work in a different jurisdiction. Let’s look at two of the major areas of impact from a tax and legal perspective.

Firstly, the systems and processes that will support this incoming talent need to be fit for purpose. There are significant processing times for immigration applications for those key domestic and international multinational companies, given the processing time for an employment permit and often an entry visa application have to run consecutively. Once complete, a prospective employee can likely commence their notice period, meaning a company could be waiting for six months.

Current delays in the processing of immigration applications, if sustained, are likely to have a significant impact on public finances and force multinational companies to locate talent elsewhere. This is a live challenge for some businesses, and it is clear that jobs and investment opportunities earmarked for Ireland will now be lost.

Let’s put it into numbers – our view is that the current processing delays could cost Ireland 1,000 well paid jobs – perhaps over €50m in taxes in 2022 alone. These jobs are not just lost for 2022 but are never returning to Ireland and the 10-year impact of the tax and ancillary income could easily stretch to over €1 billion. The focus also isn’t just on the economic benefit these foreign nationals bring to Ireland, but the cultural and educational benefits that they add to our society.

Secondly, the personal tax systems of countries will become a greater differentiator for investment in a post-BEPS (Base Erosion and Profit Shifting) world, with a global minimum corporate tax rate in progress meaning that Ireland’s main competitive advantage is being matched by more and more competitor countries. Ireland must look at how it compares with other jurisdictions when it comes to personal tax and the taxation of work.

Against the backdrop of broadening our tax base, the 2021 Global Talent Competitiveness Index Report ranks Ireland only 11th in Europe - with countries like the UK, Switzerland, the Netherlands and Luxembourg ranked higher. There are several initiatives and schemes, such as SARP (Special Assignee Relief Programme), that can be used to support this goal of making Ireland a more attractive location. However, instead of broadening the relief, Ireland has used the COVID pandemic to deny many people their SARP entitlements due to the fact they went back to their home countries to be close to family. Constant challenges around eligibility for, and application of, SARP are common.

As a direct contrast, there are a number of countries such as Italy, Netherlands and Portugal that offer more favourable income tax regimes and reliefs for expatriates, even where they are remote working for an Irish multinational. We need to meet this challenge head-on.

The American Chamber of Commerce in its 2022 US-Ireland Business Report, stated that US multinationals have 190,000 direct employees and those companies spend circa €12.4 billion in payroll costs. Given we have investment from other jurisdictions also, I think there is a reasonable view that if 20,000 employees decided to work in another country, we could have a €1-€2 billion impact on the exchequer finances. That’s an annual number – every year and potentially growing.

In the short term, the processing for all immigration applications (for e.g. employment permits, entry visas, EU Treaty Right permissions, pre clearance applications and naturalisation applications) needs to be reduced as a matter of urgency, and it is hoped that the Commission on Taxation will address the broader tax policy considerations. This should include not only the personal tax considerations, but an urgent need to simplify our corporate tax system, which has become overly complex in recent years – in particular, Ireland’s rules on interest relief and reliefs for double taxation.

When we focus on getting things done in these areas, we can bring about dramatic change. The introduction by the Justice Minister Helen McEntee of an undocumented migrant’s scheme which will help 17,000 people gain immigration permission was ground-breaking. Other positive moves (such as the hiring of staff to help with immigration processing) and signals by Government in these areas, while not as dramatic, are to be commended.

However, there needs to be a continued focus and drive on this, or we will lose both talent and new business to competitor countries with more streamlined and favourable regimes than ours. 

Please note this article first featured in the Business Post on Thursday, 7 April 2022 and was re-published kindly with their permission on our website.

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