Pre-Budget 2020 Perspective - American Chamber
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Pre-Budget 2020 Perspective @americanchamber | #USIRL19
CONTENTS PRE-BUDGET 2020 PERSPECTIVE
6
Prioritised
Infrastructure
Investment
‘For talented individuals
Personal
to choose Ireland as their
long term base, their
11 Tax Roadmap
16
Enhanced Innovation
Investment & Incentives
choices will be driven
largely by the quality of the
20
Human Capital
Investment experience of their lives
Strengthen
here – be it housing,
23 Ireland’s Corporate
Tax Roadmap transport infrastructure,
Trade Promotion and
healthcare and education.’
27 World Class Competent
Authority Investment Mark Gantly, President of the American Chamber of Commerce Ireland,
July 4 Leadership Summit speech
2 3
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective
AMBITION
Ireland as an inclusive location-
of-choice for Talent and
Innovation with Global Impact.
RESILIENCE:
Fundamental Conditions
Ireland is a full-fledged global partner of American business—
COMPETITIVENESS a critical linchpin in the global success to some of the world’s
most innovative and successful firms. Attributes that have
Accelerating Delivery provided the basis for this reputation include:
Fostering Talent Fiscal Sustainability
A secure fiscal position provides the foundation for confidence
Increase Productivity
in the future of the Irish economy as a place to live, work and
invest. Further improvements in the fiscal position should
be deployed to accelerate progress in building sustainable
RESILIENCE competitiveness for the traded sector with budgetary and
investment decisions aimed at improving national productivity.
Fiscal Sustainability
Policy Certainty
Policy Certainty Policy certainly positively encourages investment. The Chamber
Business Flexibility welcomes the certainty given on Ireland’s Corporate Tax Road
CONTEXT:
Map and the restatement of Ireland’s sovereignty and decision-
INVESTMENT making authority in relation to corporation tax policy. We also
welcome the reaffirmation of the principle of unanimity at EU
UNCERTAINTY level in relation to taxation matters.
Trade Tensions and Brexit Business Flexibility
Remaining nimble and responsive to a highly uncertain and fast
Slowing Global Economy
changing global environment is key to competitiveness. The
Changing International existing voluntarist industrial relations environment, the best
Tax Landscape practices of its modern sector, and the existing and reformed
industrial relations frameworks are serving the country well by
Disruptive Digital
delivering workplace agility, stability and productivity and is vital
Upheaval to winning mobile investment.
Climate Action
4 5
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Prioritised
Infrastructure
Investment
Ireland must make Prioritised Infrastructure Investment
the right choices Housing:
‘The state of the housing market is a
Quality of Physical Infrastructure:
‘Ireland’s very strong competitiveness
for the long term.
major impediment to attracting talent performance globally (7th) is restrained
and investment and improving Ireland’s by poor and weakening scores for
competitiveness performance and the infrastructure (23rd), including the
quality of life of its citizens. The urgency perception of basic infrastructure (35th)
Invest in housing;
and scale of the housing challenge and and maintenance and development of
the complexity of the market require not infrastructure (35th).’
only providing sufficient funding but also IMD World Competitiveness Rankings3
deploying innovative solutions and
Digital Infrastructure:
interventions by the State.’
improve roads
National Competitive Council – Ireland’s ‘Ireland is the 7th (+1) most advanced
Competitive Challenges1 digital economy in the EU, up from 9th
place in 2017. A key weakness is
Access:
connectivity, as availability of ultrafast
‘When examining Hours Lost in
and rail; access to
broadband coverage (21st) is below EU
Congestion metric, Dublin (246hrs) was average and relatively expensive (24th).’
the third-worst city (of 200 cities EU DESI Index 20194
from 38 countries analysed), while
Galway (44hrs) ranks on par with Berlin,
faster internet, for
Hamburg and Stuttgart.’
INRIX Global Traffic Scorecard Report2
Recommendations
every region. •A
ccommodation: Resource the Land Development Agency and Planning Authorities and Renew the Strategic
Housing Development Scheme.
• Project 20405: Place ‘Delivery Board’ leadership within the Department of An Taoiseach, Review and Expedite
identified Pro-Employment Projects and Planning Process Certainty.
• Region Balance: Drive Atlantic Economic Corridor (AEC) development, Align Priority Regional Infrastructure
with recommended Project 2040 Review, Expand Portfolio of available Grade One office space and Advanced
Technology Units.
• Digital: Rapid National Broadband Plan delivery and greater Digital Innovation and Use in the delivery of Public
Services.
"Finding accommodation is a big issue to attract • Utilities: Improved Electricity Interconnection and Competitive Water Infrastructure Delivery.
talent to Ireland. We need to be more attractive
than competitor cities- Barcelona, Amsterdam and 1
Ireland’s Competitiveness Challenges – National Competitive Council (Dec 2018)
London - to justify increasing our footprint in Ireland." 2
Published by INRIX in February 2019 – see www.inrix.com
3
IMD World Competitiveness Rankings, May 2019
– Site Lead, Global ICT Company 4
EU Digital Economy and Society Index (DESI), June 2019
5
Government 10-year €116 billion investment plan and planning framework. See: https://www.gov.ie/en/policy/project-ireland-2040-policy/
6 7
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Prioritised
Infrastructure
Investment
The leadership of the American Chamber are strongly proportionate changes to the planning process to narrow the provision of accommodation is a critical economic are increasingly the preferred locations for high-tech
of the view that a step-change in the pace of delivery the differentials; suggest measures to improve certainty enabler that requires continued prioritisation for planning companies’ start-ups; largely because of the increased
of strategic and pro-employment physical and digital over the planning process and the length of time and capital investment. This is especially true in Dublin, preference of highly skilled tech workers for such
infrastructure is necessary to maintain Ireland’s between planning application, to approvals and eventual with similar needs for designated urban centres of scale. locations.
competitiveness and address critical risks to economic delivery of the project. Government’s ambition for an
The cost competitive, and innovative, delivery of Dublin is a transatlantic magnet for internationally traded
well-being. upgraded Investment Project and Programme Tracker10
housing commitments is imperative if Ireland is to services and digital media investment and the American
should consider how to demonstrate to enterprise
The American Chamber has consistently called for a remain a location that retains and attracts world class Chamber expects this demand to continue if the
dependency relationships between activities, current
scenario-based approach to reviews of planning and talent. The American Chamber supports the investment economy can absorb that opportunity. Transit congestion
schedule status including variances and the reasons they
capital spending depending on the developing patterns plans and reforms within Government’s Rebuilding impacts competitiveness. Dublin needs certain and
occurred. A brief quarterly update to Project 2040 Annual
of economic and population change. During the life Ireland action plan aimed at increasing the delivery of
12
reasonable travel and transfer times, around the city, its
Reports11 with an enterprise and investor lens would be
of the National Planning Framework, reviews should homes nationwide. Ancillary facilities - such as schools, orbital route and the main arteries. The resourcing and
welcome. As increasing capacity and delivery times is an
be triggered by changes to strategic assumptions affordable childcare, roads and transport access are speedy delivery of the Bus Connect programme and
imperative, the American Chamber supports investment
underlining the analysis and guidance, not by the also viewed as essential requirements for employment cycle network is key goal for improving the commuting
in promoting project tenders to potential bidders/investor
passage of discreet time intervals. Uncertainties driven by growth. The establishment and resourcing of the National experience of those living and working in the City.
markets outside of Ireland.
Brexit, international trade and taxation regime upheavals, Regeneration and Development Agency is welcome in
The American Chamber encourages the on-time and
urgency around climate change and the quickening pace Building on the clarity of the planning framework and so far as it expedites the supply of State-owned land for
on-budget delivery of existing commitments on Metro-
of digitalisation warrants consideration. investment plan within Project Ireland 2040 as a basis for long term residential community development.
North, expanding Luas cross-city and the delivery of
sustainable long-term strategic growth for the country,
The American Chamber strongly supports Government Furthermore, supporting agencies such as the Office of Dublin Airport’s new runway to provide needed extra
the American Chamber believes that Ireland should aim
initiatives to strengthen institutional and political focus Public Procurement should be adequately resourced to connectivity capacity. Planned enhancements to the
to be recognised as the best place to work and live. The
on delivery. To further this ambition the American strengthen the mission of the new Agency. Measures to M50, greater use of high-speed bus corridors and the
American Chamber agrees with the National Competitive
Chamber recommends placing the responsibility and encourage the pooling of planning resources between expanded capacity on existing rail/light-rail services have
Council; Ireland’s competitiveness challenges require
leadership for the Project 2040 Delivery Board6 within local authorities, the acquisition of expertise to deal with important contributions to make to easing congestion.
a sustained, strategic and co-ordinated focus across a
the Department of An Taoiseach, supported by a fully planning bottlenecks and the renewal of the Strategic In the medium-term the consideration of new orbital
wide range of policy areas to improve the productive
resourced Investment Projects and Programmes Office.7 Housing Development Scheme13 would be strongly routes to connect suburban and commercial centres
capacity of the economy. Setting a long-term capital
To ensure that Project 2040 is attuned with emerging welcomed by American Chamber members. should seek to reduce the use of the M50 for shorter
investment goal of +3% of GDP to support economic
competitive threats the American Chamber recommends interconnections, allowing it to serve its main function in
and demographic growth; targeting priority areas such The American Chamber is very supportive of initiatives
that Delivery Board review project priorities and make taking traffic away from the city centre.
as the provision of affordable; accessible and quality to improve the flow and development of skills into the
recommendations to expedite identified critical pro-
accommodation and quality public services; is key to construction delivery sector. Increasing economies of City Regions: Balanced Island Development
employment infrastructure projects in light of Ireland’s
future proofing the resilience of the economy. scale opportunities via standardisation and consolidation The American Chamber welcomed the balanced
2019 National Risk Assessment Report8 and the National
of public procurement across local authorities should regional development proposed in Project Ireland
Competitiveness Councils next ‘Ireland’s Competitiveness Accommodation:
be supported. In addition, the application of LEAN 2040. Economic development and renewal should be
Challenge’9 report. The American Chamber welcomed the connection
process improvement for project management, use focused around urban centres of scale, requiring greater
made between housing and Ireland’s ability to remain
The American Chamber recommends that responsibilities of new construction technologies including best-in- urban densification and metro transport capacity. The
internationally competitive in attracting and retaining
of the Delivery Board should include: examining class construction digital information tools, and use of American Chamber believes that the regions provide a
talent in the planning framework for Project Ireland
benchmark analysis of Ireland against other jurisdictions appropriate prefabrication solutions. balance to Dublin; encouraging talent to locate in areas
2040. The American Chamber is strongly of the view that
for planning and delivery; making recommendations of with good regional and international connectivity, and
Infrastructure in Ireland’s Flagship Centre of
affordable housing.
Scale: Dublin
6
Established in 2018, comprising top officials from relevant Departments and Agencies and currently jointly chaired by the
Secretaries-General of the Department of Public Expenditure and Reform (DPER) and the Department of Housing, Planning and Investment is needed to develop Dublin as a recognised The American Chamber supports the Atlantic Economic
Local Government (DHPLG) the Delivery Board monitors implementation structures and performance across the various sectors to flagship metropolitan city; serving as a beacon for the Corridor14 concept and efforts to capitalise on the
ensure a co-ordinated and collaborative whole-of-Government approach to NDP and NPF delivery. substantial amount of activity and investment taking
entire country’s attractiveness. Cities and urban areas
7
Presently within the Department of Expenditure and Public Reform
8
See Draft 2019 Assessment here: https://assets.gov.ie/9294/d5b7898a4d8e47d1a7ff1d9efc6e1e53.pdf 12
See http://rebuildingireland.ie/
9
Ireland’s Competitiveness Challenge identifies a range of recommendations that address both immediate competitiveness issues, 13
Since July 2017 planning applications for housing developments of more than 100 residential units and 200 plus student bed
and more medium-term challenges, aimed at enhancing Ireland’s competitiveness and productivity performance. See : http:// spaces can now be made directly to An Bord Pleanála.
www.competitiveness.ie/ 14
The Atlantic Economic Corridor (AEC) is a Government-led initiative in regional development, complementing and balancing
10
See: https://www.gov.ie/en/publication/6db7c4-investment-projects-and-programmes-tracker/ Ireland’s thriving East Coast - a non-administrative or “linear” region along the Western seaboard, stretching from Kerry to Donegal.
11
See: https://www.gov.ie/en/publication/b684c6-project-ireland-2040-annual-report-2019/ https://www.atlanticeconomiccorridor.ie
8 9
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective
Personal
Tax Roadmap
place at individual county level along the west coast Ireland’s Digital Leadership
with a view to driving increased amounts of domestic Ireland is well placed to further enhance its reputation
and overseas enterprise investors. The attractiveness of for digital leadership in Europe. Sustaining Ireland’s
each ‘City Region’ can be enhanced by the completion of leadership requires a best in class ecosystem with
the broadband network, the development of Grade One ubiquitous national broadband coverage as a vital
Ireland's
office space, and Advanced Technology Units for rapid necessary condition in our knowledge-intensive
turn-up of new manufacturing, service, supply chain and economy to avoid digital, and thereby economic,
R&D operations. blackspots. The American Chamber supports the speedy
Southern & Western Priorities: Building on the significant implementation of the ‘National Broadband Plan’ to meet
tax regime
enhancements to the road network linking the capital the Government’s ambition of ensuring that the entire
with the main cities of the west and south, the following population has access to quality, competitively priced
projects within the Project 2040 are vitally important fibre-based broadband services as rapidly as feasible.
opportunities to enhance physical connectivity; This infrastructure can be transformative in how citizens
engage with government in accessing services. It will
should remain
In Munster
require state alignment with long term economic and
• The delivery of the M20 project between Cork and industrial planning that actively exploits public-private
Limerick would significantly enhance the Atlantic/ opportunities for data-driven innovation and world class
Western economic corridor by linking population cloud use.
centres, industrial clusters, ports and air hubs
internationally
Competitive Utilities
and thus improving regional connectivity and
Energy: Investment is required to ensure adequate
competitiveness to retain and attract investment.
regional/local capacity to support investment
Proposals for the N28 Cork to Ringaskiddy motorway
locations; especially in the main urban centres. Greater
must be delivered in a timely manner to support
interconnection is a key priority, including the delivery of
high-tech life science investment in that important
competitive to
the all-island North-South Interconnector and the Celtic
manufacturing and development hub.
Interconnector to mainland Europe to ensure energy
In Galway security and generation diversity. Consideration should
• Advancing the N6 Galway City Transport Project, be given to extend the country’s gas infrastructure
especially improved access to Parkmore’s industrial network, to include penetration into the centres of the
retain and draw
zone. Northwest to improve their attractiveness for investment
and incentives to encourage development. More widely,
Northwest Accessibility: The American Chamber
the utilisation of combined heat and power assets, LEAN
acknowledges the special attention that the Northwest
energy & CO2 processes and renewable energy sources
Region received in the National Planning Framework
expertise from
such as bio-gas should be encouraged.
considering the risks arising from Brexit. The region is not
well connected to Dublin or international airports. The Water: The American Chamber continues to support
development of the A5/N2 between Derry and Dublin efforts to develop and resource a strategic approach
remains the priority for American Chamber members to water services and management that is competitive
in the region. The American Chamber notes that the for commercial users. Future inward investment
overseas.
following are priority short to medium term projects: opportunities will arise with more certainty as to water
availability, quality, treatment capacity and price
• The N14 Letterkenny to Lifford route with connectivity
competitiveness. A sustained commitment to capital
to the A5 (with supporting improvement and bypass
expenditure is required to secure quality and affordable
projects) to dual carriageway standard;
provision to industry. Dublin’s critical capacity constraint is
• In Sligo, while the N4-M4 route upgrade to dual a risk to future industrial as well as population growth and
carriageway standard remains the objective, the must be addressed with urgency.
timely delivery of the N4 Collooney to Castlebaldwin
development is greatly anticipated. "We need to attract highly skilled specialists from
• A step forward in connectivity of the midlands and the our global company network for future business
West will be achieved with the completion of the N5 wins. High rates of personal tax could deter them."
upgrade.
– Country Manager, Medtech Firm
10 11
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective
Personal
Tax Roadmap
The American Chamber welcomes the Government’s ultimately will be entitled to (and thereby subject to tax)
Personal Tax Roadmap continued commitment in recent Budgets to lower returns derived by such groups. As a result, business
personal taxation – a key recommendation of the will seek to structure their business models and the
American Chamber. A competitive personal tax regime location of group assets (including intangible assets)
is an important deciding factor for global talent who can with where economic substance, including the DEMPE
‘From a competitiveness perspective, ‘Based on most recent OECD data as at choose where they wish to locate to develop their career. functions, is located or can be relocated with a focus
it is essential that the taxation system is June 2019, the average rate of income As we have previously stated in past submissions, the on key decision makers vital to the functioning of the
broad and balanced in a way that supports tax and social security as a percentage marginal personal income tax rate (together with PRSI and business operation. Attracting or retaining this operational
both indigenous and foreign enterprises, of total earnings shows the Irish regime to USC) with its low entry threshold should be reformed to substance, especially key people related to DEMPE
rewards investment and entrepreneurship be the second highest in the competitor enhance Ireland’s ability to retain and attract leadership functions, and business expertise and related activity
and encourages people to take up sample group including the Netherlands, talent and specialised skills, improve productivity and in a post-BEPS environment will be intrinsically linked
employment.' Switzerland, Singapore, the UK and reduce upward pressures on labour costs. with the corporation tax take in the future. Therefore, it
National Competitive Council – Ireland’s the USA.’ is imperative that income taxation policy does not inhibit
Members of the American Chamber continue to identify
Competitive Challenges15 OECD Taxes on Labour Database 2019 18 Ireland as a location of choice for such leadership and
Ireland’s high marginal income tax rate as a dissuasive
specialised talent.
‘Consideration may be given to a broader factor in the retention and attraction battle for advanced
‘Ireland’s high rate of marginal taxation
skills and leadership experience. This vital talent pool is in Personal Taxation Roadmap: The American Chamber is
review of personal income taxation to on income plays an increasingly important
short supply globally, and both employees and potential strongly of the view that reform should continue to be
better reward work ... the relatively high part in an individual’s decision-making
recruits are being attracted to jurisdictions where their central to Ireland’s ambition to reward existing talent,
marginal tax rate faced by high income process. The fact that many of competing
total income tax and social security is lower – often encourage émigrés back to develop their careers and
earners is an impediment to international EU countries have schemes offering significantly so. The current higher marginal income tax ensure that working in Ireland is a rewarding proposition.
competitiveness and a disincentive to reduced levels of personal taxation for rate of 52%, when one includes PAYE/PRSI and USC, The American Chamber supports reforms focused
attract skilled labour from abroad.’ talented, mobile individuals serves to is among the highest when compared with countries on rewarding productivity by providing direct relief
International Monetary Fund: Ireland 201816 exacerbate this problem.’ that Ireland currently competes with for investment. The to individuals by increasing the entry point to the top
National Competitive Council – Ireland’s relatively early entry point that income is exposed to the marginal income tax rate and by reducing the current tax
“ … single earners in Ireland face among Competitive Challenges19 highest marginal personal tax rate is uncompetitive for a rate to below 50% on a phased basis of 1% per annum
the highest marginal tax rates in the EU.
traded economy reliant on a highly mobile labour market over the coming years.
… a very high marginal tax rate in Ireland is within Europe.
reached at a relatively low point in the By targeting the following additional areas, the American
As a location of choice for international business, Chamber believes that the ability of our members to
income distribution.’
Ireland’s personal tax regime is assessed considering attract and retain critical technical and leadership talent
European Commission’s Economic Brief17
OECD international tax reforms and redesigned transfer within the jurisdiction would be significantly enhanced.
pricing rules. The reforms seek a greater alignment of
Taxation of Share Based Remuneration: The American
taxable profits with the location of economic substance
Recommendations Chamber made a submission to the Department of
and value creation, with specific focus on the location
Finance as part of the 2016 public consultation on the
•P
ersonal Tax: Reform high marginal thresholds and rate to reward and attract talent. of functions, assets and risks. With respect to business
Taxation of Share Based Remuneration20 which remains
•S
hare-Based Remuneration: Apply a capital gains regime on realisation of Share-based Remuneration. value derived from intangibles, post BEPS, corporate
relevant for this and future budget reforms. At its core
•P
ension Provision: Index link Contribution Thresholds to the Consumer Price Index (CPI) annually. profit allocation will have greater alignment to where the
is the recommendation that the personal tax treatment
significant elements of the development, enhancement,
•S
pecial Assignee Relief: Enhance Access by extending the 5-year term. of shares acquired under all share-based remuneration
maintenance, protection, and exploitation of intangibles
•B
usiness Travellers: Aligning policy to pre-2018 position for Incidental and Business travel. arrangements (e.g. share option schemes, Restricted
(DEMPE functions) is carried on. This drives a focus on
Stock Units, etc.) should be enhanced by removing
people functions related to the DEMPE functions, and
the personal income tax charge on the acquisition/
less on contractual terms and capital. The identity of
granting of such remuneration in favour of a capital gains
the member or members of the multinational group
15
Ireland’s Competitiveness Challenges – National Competitive Council (Dec 2018). charge on the realisation of the share-based income
performing such functions is now to become a key
16
IMF June 2018 Article IV Staff Report, IMF to the individual. This remains the Chamber’s primary
consideration in determining which entity or entities
17
Personal Income Tax in Ireland, Economic Brief 028, July 2017 recommendation for policy change in this area.
18
An American Chamber comparative analysis using OECD Taxes on Labour Database, June 2019
19
Ireland’s Competitiveness Challenges – National Competitive Council (Dec 2018). 20
https://www.amcham.ie/Advocacy/Policy-Work/Submissions.aspx?page=3
12 13
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective
Personal
Tax Roadmap
The American Chamber believes that certain to make competitive enhancements, the American the American Chamber believes that a commitment by Reciprocal social security arrangements: Ireland currently
amendments to the current taxation treatment of share- Chamber suite of recommendations made in its Government to index link the thresholds would be a more has several social security arrangements in place with
based awards could, in conjunction with other reforms Pre-Budget Submission 201821 remain highly relevant. equitable way of ensuring that the limits are annually key jurisdictions including Canada, Japan and the United
to Ireland’s personal tax regime, significantly enhance The Chamber would be pleased to discuss these with revised to ensure the real value of the current limits are States. The American Chamber recommends that the
Ireland’s overall FDI offering by rewarding productivity. the Department. maintained at current levels and not diluted over time. number of reciprocal social security arrangements be
Moves to enhance the taxation of share-based reward Thus, the American Chamber strongly recommends extended with key trade partners including jurisdictions in
Positive steps forward in Budget 2020 would include:
in 2018 with the introduction of the Key Employee that the individual’s Personal Fund Threshold and the the Asian markets.
Engagement Programme (‘KEEP’) targeted at small • An assessment as to whether the 5-year relief Standard Fund Threshold should be increased in line
Capital Gains Tax Exemption: The American Chamber
growing enterprises are welcome. This is an area of term under SARP should be extended to remain with the Consumer Price Index (CPI) and this indexation
recommends an increased CGT exemption for an
significant importance for a wide range of our members, competitive with other jurisdictions. should henceforth occur automatically each year.
individual from the current limit of €1,270 per annum
but is significantly relevance to the new and emerging • The requirement for a relevant employee to have In addition, employers would be wholly opposed to given its current deminimus level.
FDI players wishing to use share incentives effectively to been employed for a period of 6 months prior any change which would give rise to a restriction in
attract and reward talent that take on the risk associated to assignment can in certain instances preclude the age-based thresholds and annual earnings cap
with joining a start-up or scaling-up organisation with individuals employed in the technology and which determine the maximum pension contribution of
finite cashflow resources. knowledge-based sectors from qualifying and an individual qualifying for income tax relief. Any such
For Budget 2020, the American Chamber puts forward should be reviewed. amendment would only serve to further dis-incentivise
several measures to build on previous reforms including: • An assessment as to whether the threshold of individuals from contributing to the funding of their
€75,000 renders the Irish regime uncompetitive future pensions. Consideration should be given to
• Enhance the programme by providing a safe harbour
by comparison with other countries. relieving measures where employees take unpaid leave
limit with respect to share valuations.
and the Chamber would be happy to discuss further with
• Remove the exclusion on certain companies from the • Application of the relief to USC and PRSI, in addition
the Department.
KEEP scheme, in particular technology companies to income tax.
Professional Subscriptions: In the context of Ireland’s
that are also carrying on financial activities. Business Travellers: Business travellers are key to any open
knowledge economy, industrial employees membership
• Enhancing the KEEP scheme by revising the limits economy which hopes to attract inward investment and
of professional bodies is a necessity for many businesses
imposed in respect of employee numbers, turnover generate increased export activity. These travellers include
and should be eligible for tax relief, without triggering
and balance sheet valuation. those who travel from US parent companies for meetings,
benefit in kind implications. The Chamber would be
for short projects or to provide experience and guidance
• Revise the requirement for a qualifying individual to happy to discuss with the Department further.
to Irish staff. While the American Chamber welcomes
be a full-time employee in order to avail of the relief Foreign Earnings Deduction: The Foreign Earnings
Revenue’s work in providing clarity on the regime’s
to incentivise high skilled workforce re-entry. Deduction provides tax relief from income tax for
operation our member’s considers competitor jurisdictions
• Extending the relief where existing shares are such as the UK and Switzerland as having more favourable individuals who are resident in the State but
granted, rather than only to new shares. and practical laws in place for business travellers. temporarily carry out their duties in specific countries.
Accordingly, the American Chamber is of the view that if The American Chamber recommends that the Foreign
• Improve the tax treatment of all share-based
the original practice cannot be restored within the context Earnings Deduction relief be extended to include more
remuneration arrangements by removing Employee
of existing legislation then consideration should be given emerging markets.
PRSI and the USC.
to legislating to re-establish previous practice of allowing a
• Reduce the CGT rate from its current level of 33% to 30-day annual exemption for those travelling to Ireland in
maintain the competitiveness of the current KEEP consecutive years from a DTA country.
regime in comparison to other jurisdictions; Consideration may
Pensions Policy: It is of the utmost importance that be given to a broader
Assignee Program: pension policy changes do not adversely impact the
review of personal
The American Chamber supports Government initiatives sustainable competitiveness of doing business in Ireland
aimed at attracting specialised talent and leadership
income taxation to
and employers’ ability to retain experienced leadership
executives to relocate to Ireland with an aim of bringing talent for Irish based operations. While a one-off move
better reward work.22
with them investment and employment. To continue to a higher threshold would be a more impactful option,
21
See: American Chamber Pre Budget Submission 2018 https://www.amcham.ie/advocacy/policy-work/submissions.aspx 22
IMF, 2018
14 15
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Enhanced Innovation
Investment & Incentives
All of the Enhanced Innovation Investment and Incentives
conditions are ‘Ireland ranked 35th for R&D spend
at % of GDP.’
IMD 2019 World Competitiveness Rankings
‘Many of the strongest empirical studies
that have been conducted throughout
OECD countries over the past two
present for Ireland
decades show that research and
‘Ireland's economy has been ranked
development significantly improves firms’
14th in the world for innovation including
performances, however measured.
32nd for research intensity placing it
The economic performance of a country
behind Switzerland, Singapore, Austria
thus depends on its capacity to provide
to be a world
and the USA.’
Bloomberg Innovation Index 2019
the right incentives to encourage
R&D investment.’
‘Ireland’s lowest indicator scores comprise Organisation for Economic Cooperation
R&D expenditure in the public sector.’ and Development24
innovation leader,
European Innovation Scoreboard 201923
Recommendations
•K
nowledge Intensity: Raise investment in SFI, establish a world class Advanced Manufacturing Centre of
if we remain
Excellence and extend the Disruptive Technologies Innovation Fund to include public service delivery challenges.
•R
&D Credit Regime: Expand limits for providing contracted R&D services. Administration clarity and consistency.
• IP Regime: Improve competitiveness for acquiring IP and continuance of the Knowledge Development
Box regime.
competitive. The American Chamber believes that Science
Foundation Ireland’s (SFI) focus on “Excellence and
Impact” is a sound strategy for inward investment.
The American Chamber is very supportive of the
Disruptive Technologies Innovation Fund to address
the national policy challenges as a ‘Challenge-Centric’
Public investment should seek to retain the current RDI method for aligning innovation investment with public
investment in scientific excellence, as well as providing priorities. For future calls, the American Chamber
additional resources to improve research centres of scale recommends that Government formulate criteria
focused on the application of knowledge and technology. for funding calls that promote industry leadership,
"Incentives are one of the main factors Having a renowned and internationally recognised
centre of excellence in advanced manufacturing would
encourage MNC-SME-HEI linkages and builds on
established eco-system strengths to deliver projects of
we use when determining how we underpin Ireland’s ambition to continue to design, supply measurable impact within 3-5 years that include public
allocate resources in Europe" and support the delivery of goods and services to service delivery challenges.
global markets.
– Chief Executive, Financial Services Company
23
EU Commission Innovation Scoreboard, June 2019
https://ec.europa.eu/growth/industry/innovation/facts-figures/scoreboards_en
24
OECD Science, Technology and Industry Policy Papers No 32 2016
16 17
The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Enhanced Innovation
Investment & Incentives
The leadership of the American Chamber of Commerce • Leveraging the State’s own technical resource as per to Ireland from an IP perspective. The Irish IP amortisation on an annual basis, and thus companies who claimed
Ireland are firmly of the view that the R&D tax credit the IDA’s grant assessments to review the technical regime (included in Section 291A TCA 1997) is a key pillar relief under Section 291A on the amortised basis may
regime has been, and can continue to be, a critical tool in basis of R&D tax credits claims would assist in this within this suite and there are several areas where the lose the relief if the law was to remain as is. In this
ensuring that Ireland is competitive for research, product alignment and allow reduced administration. American Chamber believes enhancements should be context, it is evident that Section 291A may have to
development and process innovation projects. made in order to improve competitiveness and attract be amended technically in any event such that it is
• Amending R&D legislation to ensure that certain
further IP related investment. These recommendations are: now timely for a review of the section for this and the
The regime encourages companies to undertake high- costs incurred in undertaking a qualifying R&D activity
• Amendments to provide that there is no claw-back of above-mentioned US accounting issue. The American
value-add R&D activity in Ireland and thereby supports under the general framework of S.766 TCA 1997
IP amortisation allowances previously claimed. Chamber would be happy to explore these issues
wider investment and employment. It is now an integral should be allowable.
further with the Government and the Department of
part of Ireland’s corporate taxation proposition to retain • Provide further guidance (potentially certain “safe
• Recognising that to support global R&D projects the Finance as required.
and attract this investment. Member feedback suggests harbour” tests) in relation to what activities should be
regime needs to recognise how Irish subsidiaries
that within the knowledge intensive sectors some 37% regarded as trading in an IP context. This area is of key importance in a post-BEPS
engage with connected parties (i.e. parent companies
of the total employment base is dependent on the environment and the American Chamber would be
in the US). • Amend the definition of “specified intangible asset” to
existence of a competitive R&D tax credit regime. happy to consult further with the Department on any
• Evolving the regime, while remaining based on include goodwill where such an amount is amortised
change not outlined above.
Small open economies are increasingly competing for accounting purposes.
the OECD Frascati model, to expand the qualifying
against each other in access to talent and global The American Chamber would also welcome
fields of science to emerging areas (e.g. such as • The current requirement included in Section
innovation leadership in business, science and further consultation on opportunities to enhance the
the interaction between technology and human 291A to regard the income and expenditure from
technology. Inward investment is key to the R&D competitiveness for IP related investment.
behaviour). qualifying IP as a “separate trade” from an Irish tax
ecosystem in Ireland; 69% BERD (Business Expenditure
perspective causes several practical issues for Knowledge Development Box (“KDB”): The American
on Research and Development) in Ireland is by foreign • Clarifying the level of novelty required to be sought
some of our Members. In this context, the American Chamber was a key contributor to the consultation
companies. Research shows that tax incentives have a in the Irish regime to reflect conditions on the ground
Chamber would recommend that the impact of this process initiated to consider the creation of a
clear advantage over direct funding FDI investments and and to allow Irish companies to continue on the path
requirement is fully considered in conjunction with ‘Knowledge Development Box’ (KDB) regime for Ireland.
tax credits have become an increasingly popular method from ‘D’ to ‘R’ over time.
any potential costs that would be associated with It is imperative that Ireland continues to illustrate its
of driving R&D investment across OECD countries. It is • Allowing an administrative innovation to provide an
removing this requirement with a view to ascertaining competitive and certain tax regime for IP development
vital that Ireland continues to have an R&D incentive election option for the R&D credit regime to allow
whether the removal of the “separate trade” and exploitation in Ireland. Understanding the necessity
program that matches or exceeds the best available claimants with a tax base to forgo corporate tax
calculation could be a worthwhile enhancement to for reviewing tax expenditures requires an "end date" for
to ensure that we remain globally competitive and deductions and take the benefit foregone by wa
Section 291A. The American Chamber would be more the KDB, it would be important for investor certainty that
continues to attract the best R&D investment. of R&D credit.
than happy to discuss this issue in more detail the Minister makes a positive statement in Budget 2020
The Chamber outlined its views on the 2019 Review • Including the research and development costs as required. that the intention would be to evaluate the incentive
of the R&D Tax Credit Regime as part of the recent associated with contributions to standards at that point for its ‘fitness-for-purpose’. Further, the
• The accounting for amortisation regimes (such as
public consultation. Key recommendations for
25
development as a pathway to encourage ‘standards relief currently applies to accounting periods which
Ireland’s) under US accounting principles is a complex
enhancements included: by design’ amongst enterprise. commence before 1 January 2021 and confirmation of its
area. In several instances, this is a key issue for our
• Increasing the current limits imposed on third party continuance after that date would be welcomed.
Intellectual Property (IP) Members. The American Chamber recommends
payments for providing contracted R&D services.
The American Chamber believes that the continued that the Government considers whether the IP
• Altering the R&D tax credit refund mechanism to enhancement of Ireland’s IP offering is critical from an amortisation regime could be amended to deal with
facilitate the offset of the refund arising from the R&D Irish tax policy perspective to create an environment these challenges. Further, most Irish companies who
tax credit against other taxes. where Ireland can compete for mobile IP prepared financial statements under ‘old Irish GAAP’
related investment. were obligated to convert to FRS 100/101/2012.
• Amending Section 766 TCA 1997 to delete the
These new accounting standards require companies
term “wholly and exclusively in the carrying on ... of IP amortisation regime: The Government and Department
to ‘fair value’ certain assets, including IP. In effect, this
research and development” and replaced with “for the of Finance have stated that they regard Ireland as having
means that such assets may no longer be amortised
purposes of research and development.” a suite of offerings to attract knowledge intensive activity
25
https://www.amcham.ie/advocacy/policy-work/submissions.aspx
18 19The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective
Human Capital
Investment
Ireland can stay
ahead of the game, Human Capital Investment
deliver faster
‘Increasingly companies prioritise the ‘Ireland ranks 21st in a global ranking
availability of skilled local talent when of countries best able to develop, attract
establishing their base of operation.’ and retain highly skilled workers.’
National Competitive Council – Ireland’s World Talent Rankings 201826
results, foster
Competitive Challenges 2018
‘Ireland ranks 20th re higher level
education meeting needs of the economy.’
IMD 2019 World Competitiveness Rankings
talented people, Recommendations
•T
raining: Focus National Training Fund/Human Capital Initiative on in-work/enterprise driven programmes.
•E
ducation: Accelerate STEM Action Plan: Promoting STEM careers; teaching CPD rollout and Implement
and demonstrate
Languages Connect.
•T
op Talent: Commit to a stable future-proof funding model for 3rd Level and continued resourcing for
Visa-Permits Regime.
world beating Education and Training
Industry and the FDI sector make significant contributors
to higher and further education institutions through the
development of research and innovation programmes,
The American Chamber welcomed the independent
review of the National Training Fund (NTF) following
the rise in the National Training Levy on employers and
remains of the view that the NTF should pivot its strategic
productivity.
curriculum development support and work placement focus away from labour activation, towards programmes
opportunities. Benefits flowing from this engagement relevant to employers, delivered with more transparency
include strengthened learning outcomes, skills alignment and stronger evaluation. The American Chamber is
and strategic linkages between industry and the supportive of the funding for and launch of the Human
education and training sector. Capital Initiative in 2020 in so far as it expedites the
investment on in-work/enterprise driven programmes
The American Chamber is very supportive of the
to meet the future skills needs of the economy. Our
Action Plans for Education and Ireland’s National Skills
members remain supportive of alternative pathways
Strategy’s goal of engaging more people in lifelong
to education (e.g. P-TECH and similar) and career
learning, as a key approach to boosting firm-level and
"Increased funding in targeted education national productivity and preparing for a world of work
progression such as the new apprenticeship models and
initiatives prepares graduates for the future. transforming with the application of digital technology.
the reform of Springboard to widen access.
Government Education Policy could be better The American Chamber recognises that lifelong The American Chamber supports the measures
learning is a joint enterprise between government and announced in the National Planning Framework and in
aligned to Ireland’s business needs." business; and our member companies are committed to the Department of Education’s STEM Education Policy
– Site Director, Pharmaceutical Company investing in the training and development needs of their to boost STEM education; in particular to increase by
employees. 20% the total students undertaking Chemistry, Physics,
26
IMD World Talent Ranking 2018
20 21The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Strengthen
Ireland’s Corporate
Tax Roadmap
STEAM
subjects -
Ireland is a
recognising the
contribution
and the exploration of headcount cost-sharing
of ‘Arts’ to
mechanisms to boost provision.
innovation
compelling
• Building-in performance related metrics to the
funding allocation model for higher level education
with a focus on alignment/engagement with industry
Technology and Engineering at Leaving Certificate level. requirements.
proposition: agile,
However, the American Chamber calls for the increased
• Ensuring there is clear link between the numbers
funding of STEAM subjects (recognising the contribution
forecasted to take up work in Ireland and planning for
of ‘Arts’ to innovation) and the acceleration of the
access to housing and schooling.
implementation of relevant actions arising from the STEM
business-friendly,
Education and Review Group, through the provision of The long-term funding of Ireland’s further and third level
the infrastructure necessary for the digital and language sector remains uncertain. Thus, the American Chamber
strategies for schools. supports a strategic decision on the recommended
funding options outlined in the report of Expert Group on
A summary of the American Chamber’s priorities
and known for its
Future Funding for Higher Education (July 2016).27
here includes:
The American Chamber believes that opportunities exist
• Advancing the work of the National Skills Council on
for further innovation and productivity to contribute to the
future skills foresight, especially as it relates to plans
sector through proper resourcing, as well as a transparent
certain policy and
for the provision of 50,000 upskilling and reskilling
and equitable financial participation of the student in their
places by 2022.
further education.
• Promotion of an Industry-Education collaboration in a
Building on the modelling and forecasting from the
new model for school’s career guidance.
fiscal environment.
Expert Group on Future Skills Needs (EGFSN, and others)
• Continuing to support the ICT Action Plan including to quantify the demand and supply for specialised talent
heightened efforts in promoting Ireland as destination under several economic scenarios – the ICT Action Plan’s
for STEM career opportunities and development. strength is its joined-up approach to what is a global
We must protect
talent challenge. This integrated approach includes: (a)
• Commitment to the STEM Implementation
seeking to generate forecasted skills and competencies
Programme to include speedy delivery of Computer
from the pipeline of talent in the education and training
Science into the Leaving Cert curriculum, resourcing
system; (b) activating those already in the workforce to
the CPD framework for teachers and investment
this reputation.
transition into the ICT sector where demand is located;
in promoting STEM careers at all levels within the
and (c) where these measures are forecast to fall short,
education system.
and talent from the EU/EEA does not bridge gaps,
• Bringing forward the implementation of the National having a proactive migration policy by encouraging those
Languages Strategy that supports an all-of-system/ with critical skills to come to Ireland to work and live.
levels approach including in-country immersion for
These elements are integral to a systems approach.
language development to build on EU programmes
The American Chamber continues to support the
such as Erasmus.
resourcing of, and further innovation in, Ireland’s visa
"We are constantly in competition with other
• Delivery on Government’s plan to have 14,000 and permits system with the aim of making Ireland’s countries for future investment. Many of our
Apprentice and Traineeships per annum by 2020 by
effective promotion of the opportunities to employer
regime the international benchmark for forecasted skills
ecosystem needs; leveraging IT and its ease of access
competitors have similar and in some cases
and candidate markets, encouraging flexibility in and interaction with users. more attractive tax regimes."
work-training timetables, the use of online tools
– General Manager, Manufacturing Site
27
See https://www.education.ie/en/Publications/Policy-Reports/Investing-in-National-Ambition-A-Strategy-for
-Funding-Higher-Education.pdf
22 23The American Chamber of Commerce Ireland | Pre-Budget 2020 Perspective Strengthen
Ireland’s Corporate
Tax Roadmap
legislation, to ensure companies have adequate time to
Strengthen Ireland’s Corporate Tax Roadmap verify their strategic needs and investment planning for
2020 and beyond with a level of confidence. In addition,
the American Chamber believes a refreshed roadmap
should consider the new EU Mandatory Disclosure Rules
‘Ireland’s corporation tax regime should (MDR) as it is essential for Irish resident companies to
remain an important part of Ireland’s long- understand their obligations in respect of same.
term wider competitiveness offering to
Approach to the recent EU Anti-Tax Avoidance
support enterprises based in Ireland invest,
Directives (ATAD): In prior years, the American Chamber
innovate and compete internationally.’ outlined several recommendations with respect to the
National Competitive Council – Ireland’s implementation of certain provisions of the ATAD into
Competitive Challenges
Irish law. While certain provisions such as the new CFC
rules and Exit Tax on certain migrations of tax residence
have been introduced into Irish law as of the 2019
Recommendations
and 2018 respectively, there remains the issue of the
•T
he importance of the certainty of Ireland’s Regime and its Corporate Tax Rate of 12.5% remains of critical implementation of Interest Limitation and Anti Hybrid
importance. rules to be considered on which the American Chamber
• EU ATAD Reforms: Consultation is essential on Interest Limitation and Transfer Pricing Rules Changes. has shared its views with the Department of Finance
• BEPS 2: Continue to support the Irish Governments position that promotes a multilateral approach to taxation of earlier in 2019.29
the digital economy over reactive and economically damaging unilateral measures.
In particular, the American Chamber wish to reiterate key
• Double Taxation: In the absence of fundamental reform to its territorial basis remove the ‘Irish measure of income’
considerations related to the timing of changes to interest
limitation for foreign withholding taxes on a formula-based approach and permit the pooling of surplus credits.
limitation rules under active consideration to include:
• On implementation, the 30% interest limitation should
be included.
Internationally competitive, certain corporate tax policy In respect of discussions on evolving taxation regimes
• On implementation, the proposed “grandfathering” of
is a necessary part of Ireland’s FDI offering to retain and for a digital economy, the American Chamber strongly
loans entered into pre - 17 June 2016 should
attract substantive operations in Ireland. The commitment supports the Government’s position to seek a global
be included.
to Ireland’s regime and its corporate tax rate of 12.5% solution through the OECD. Government opposition to
must remain. The publication of Ireland’s Corporation the previous EU Commission’s proposed Digital Services • The Government should consider how the Interest Internationally
Tax Roadmap demonstrates that the Irish tax regime
28
Tax (DST) Directive and Significant Digital Presence (SDP) limitation provisions can be efficiently implemented competitive, certain
in conjunction with Ireland’s existing tax legislation in
continues to respond to the changing international Directive should be sustained, to protect innovation corporate tax policy
tax competitiveness landscape through ongoing and competitiveness within the European economy. this area. The Chamber believes that simply adding
is a necessary part of
consultation and open communication with stakeholders. The American Chamber is most concerned about the the proposed interest limitation provisions into
Irish legislation without amending and significantly
Ireland’s FDI offering
The American Chamber believes that Ireland should economic damage that taxes on turnover could cause.
continue to demonstrate policy development Such levies target the turnover of digitalised enterprises simplifying current Irish tax legislation (potentially
to retain and attract
leadership in multilateral discussions to improve the without a link to either profits or the value creation in the on a phased basis) would put Ireland at a significant substantive operations
efficacy of international taxation rules. In parallel, the jurisdiction where they are levied. competitive disadvantage in this context when in Ireland. The 12.5%
American Chamber welcomes Government’s welcome compared to most other Member States. rate remains of critical
Certain aspects of the EU’s Anti-Tax Avoidance Directive
commitment to Ireland’s sovereign decision-making
(ATAD) were enacted in Irish domestic law from Transfer Pricing Modernisation: The American Chamber importance.
authority, reaffirmation of unanimity at EU level in relation
1 January 2019, with further changes to be enacted was pleased to respond to the Department of Finance’s
to taxation matters and its support for international
from 1 January 2020 onwards. To improve certainty recent stakeholder consultation on its ambition to
rules that avoid double taxation, are pro-growth and
the American Chamber would welcome a roadmap of
employment, and are grounded on value creation.
how the measures will be implemented into Irish tax
29
ee American Chamber submission ‘ATAD Implementation – Hybrid & Interest Limitation Rules’
S
28
See: https://www.gov.ie/en/organisation/department-of-finance/?referrer=/en/updates/irelands-corporation-tax-roadmap https://www.amcham.ie/Advocacy/Policy-Work/Submissions.aspx?page=1
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