Department of Finance will consider recommendations, says Finance Minister Jack Chambers
Share-based payment schemes cost Exchequer about €400m last year
The Government should consider introducing measures to curtail the growing cost to the Exchequer of share-based remuneration schemes, a report prepared for the Department of Finance has recommended.
The report by consultancy firm Indecon said the cost to the Exchequer of such schemes hit almost €321m in 2022. The value of the schemes that year was €2.1bn. The report by Indecon said the cost to the Exchequer comprised €85m in lost income tax and €236m in lost employer PRSI.
Indecon reckons the cost of the schemes to the Exchequer hit about €400m last year.
Employers groups have been pushing ministers to expand share based pay here, including as a key way to recruit and retain staff without hitting cash flow in young businesses.
In his Budget speech on Tuesday, Finance Minister Jack Chambers said he and his officials are currently assessing the report prepared by Indecon.
“Recognising the important role that share-based remuneration plays in rewarding and retaining employees, which in turn helps businesses to thrive and grow, my department commissioned an independent review of share-based remuneration this year,” Mr Chambers said.
He added that the recommendations in the report will be considered “in due course”.
Share-based remuneration schemes were introduced to help businesses attract employees and directors, and to spur economic growth.
Indecon recommends that given the rising cost of such schemes to the Exchequer, the government could consider introducing a cap on the level of employer PRSI connected to share-based remuneration.
The information, communications and technology sector accounted for the largest value of share-based remuneration schemes, with the value of such shares in that sector in 2022 totalling €689m. Manufacturing was the second largest sector utilising these schemes, with a value of €268m.
Foreign-owned multinational firms accounted for the largest proportion of the value of share-based remuneration, noted Indecon. Of these, firms headquartered in the US accounted for €1.25bn in 2022, or more than half of the total.
An analysis of PAYE data by firm size showed that firms with more than 250 employees accounted for between 82pc and 85pc of employer PRSI foregone in the period 2020- 2023. Micro and small firms’ use of the schemes is very limited, the report added.
Indecon has also recommended that measures should be taken in the short term to improve the attractiveness of the Key Employee Engagement Programme (KEEP), which is a targeted scheme that aims to assist start-ups and SMEs through a number of tax advantages.
Only 26 individuals exercised share options under this scheme in 2022 and the total value of share options exercised was only €3.2m, Indecon noted.