National Civil Aviation Development Forum Leasing and Finance Working Group Position Summary

Transcription

1 National Civil Aviation Development Forum Leasing and Finance Working Group Position Summary Topic: IFS2020 Initiative Increasing Employment in the International Financial Services (IFS) Sector 1. Special Assignee Relief Programme ( SARP ) 2. Other Expat-related Employment Considerations Risk / Opportunity and Associated Implications Introduction Ireland has been the global leader in aircraft leasing since the founding of the industry in the 1970s. This leadership position has come under threat in recent years from new and emerging lessors in Asia Pacific, eager to participate in a rapidly growing and profitable sector. To attract aircraft leasing platforms to their borders, a number of policy initiatives have been implemented by the governments of Singapore, China and Hong Kong. Growth in aircraft leasing was made a strategic priority in China as the sector was specifically identified in their most recent 5-year plan. In fact, over a span of just 18 months, all 5 state banks as well as 3 major policy banks have formed new aircraft leasing companies. Under the current Special Assignee Relief Programme ( SARP ) regime there are a number of constraints that are preventing growth in the industry these restrictions are not limited to the leasing and finance sector but affect other sectors equally. For multinational organisations access to highly skilled expertise is fundamental to the growth of their business. Ireland currently does not have sufficient skill-set to meet the demand in many industries. A major imposition is restrictive legislation around employment of foreign nationals which minimises opportunity to attract and retain highly skilled expertise. A number of modifications to existing policy would go a long way to remedying the current difficulties. As part of the work of the Leasing and Finance Working Group an early work-stream identified was to define the size of the leasing and finance sector including numbers employed and its growth in recent years. The purpose of this work is to define Aviation Leasing and Finance activity in Ireland using the same metrics of the IFS2020 Strategy for International Financial Services. The goal of that Strategy is the creation of an extra 10,000 net new jobs, in companies supported by IDA Ireland and Enterprise Ireland, over a five year period beginning in Aviation Leasing and Finance companies in Ireland are part of the base of 35,000 jobs that make up the IFS portfolio in Ireland. Currently the Aircraft Leasing industry directly employs approximately 5% (1,800) of the IFS portfolio, however the skills required to work in the sector attracts high salaries and the structure of the business model relies heavily on outsourcing to professional services firms. The true impact of the sector is much larger than the initial figures suggest and that does not take into account the linkages to the MRO sector that Page 1 of 6

2 brings additional employment and activity in a different sector and has greater regional impact, with many of the activities located in Shannon. At the same time, under this work stream AerCap and IDA Ireland reviewed the position of the Irish Leasing and Finance sector in the international market. This provides a context to better understand what needs to be done to protect the current levels of employment in Ireland and to develop the sector in the future. As subset of the financial services sector, aircraft leasing has grown significantly over its ~40 year history and now accounts for over 150B in aviation assets. Ireland is home to many leasing companies and is recognised internationally as the centre of excellence in the space. In fact, over 60% of aircraft under operating lease are managed from Ireland, which hosts operations from 8 of the 10 largest players in the industry. A separate document The Development of the Aircraft Leasing Industry in Ireland details the growth of the industry and our market leading position. Factors that contributed to this success include legacy considerations such as the formation of Guinness Peat Aviation in Shannon during the 1970s and favourable corporate tax regime. Given the increased mobility of business today, particularly in the areas of financial services and technology, companies have an unprecedented degree of flexibility in deciding where to locate their operations. Ireland has developed, over a number of years, a very competitive corporation tax regime that has proven highly successful in attracting foreign direct investment to the country. The National Competitiveness Council s 2016 report notes that The availability of talent and skills are one of the main differentiators between countries. An important consideration for businesses when choosing where to locate is the availability of high skilled professionals with the relevant knowledge and expertise. Ireland has a competitive strength in the area of training and education. Over the last 10 years the number of third level aviation related programmes on offer has increase from just four in 2005 to twenty four in Ireland s market leading position in Aviation Leasing provides a good pool of indigenous talent but this must be supplemented by continuing to attract senior industry executives from overseas. 1. The NCC 2016 report also notes that The global war for talent has never been more intense and it is important that Ireland considers, in addition to developing the best possible education for its indigenous talent, how our indigenous talent can be retained and how suitable talent can be attracted from overseas. The recommendations below have been developed in the context of the work that is already being carried out to maintain Ireland s competitive position as a location for high skilled professionals across all sectors, not just IFS. The high salaried positions referred to above make the Aircraft Leasing industry an important reference case for the attraction of similar roles in the wider asset management sector. Any policy interventions that can improve the competitiveness of the jurisdiction for such highly skilled well remunerated roles will have an impact that goes beyond the Aircraft Leasing sector. Page 2 of 6

3 Steps being taken in competitor locations Since the foundation of the industry in the 1970s much of the growth of the global fleet has been centred in the US and Europe but in the coming years growth will overwhelmingly be focused in Asia. The growth of airlines in Asia has been accompanied by jurisdictions in the region seeking to develop aircraft leasing platforms namely, China, Hong Kong and Singapore. These jurisdictions are challenging Ireland s global leadership through capital investment in aircraft leasing platforms and the implementation of corporate and personal tax policy reforms. The growing prominence of air travel in China is evidenced by passenger numbers, with three of the top ten busiest airlines in the world and two of the top ten airports in the world. Ireland must be mindful of these global competitive realities and adopt sensible policy measures to combat the threats imposed from other jurisdictions. Special Assignee Relief Programme ( SARP ) The establishment of the Special Assignee Relief Programme ( SARP ) and the subsequent modifications to the programme provide a useful starting point for attracting senior level managers and talented individuals to work and live in Ireland. Participation in SARP has been well below original projections due to a few adverse employment provisions, which are outlined in the recommendations section to this Position Summary. Other Foreign National Employment Considerations While modifications to SARP are critical to Ireland s ability to attract and retain highly skilled employees, the Government should also address other issues that are meaningful for foreign Page 3 of 6

4 employees and their families. Our recommendations in this area reflect a need to consider the whole life experience of foreign nationals and their immediate family. Identified constraints for attracting and retaining talent SARP Related Constraints 1) The 6-month requirement Under the current SARP legislation it is not possible to hire from overseas and have the new hire benefit from SARP unless they have worked for the company in an overseas location. In order to comply with this an employer would have to hire a person into one of their overseas offices. By way of example let s assume the employee is currently residing in France or the UK, the employer would have to move the employee and their family to an office, for instance in Amsterdam for at least 6 months before they finally move to Ireland. In our experience, no family will do this; integrating twice into two different societies, moving children into two different education systems twice is simply not practical. 2) Limited relief 5 years Entitlement to SARP continues for a period of just 5 years. This compares unfavourably with other jurisdictions. The 5-year term hinders long-term retention of highly skilled employees in Ireland and creates a disincentive for employees to remain in Ireland. Other Foreign National Employment Constraints 1) Spousal working visas The fact whether their spouse will be able to continue to work in the new location is an important factor for many foreign nationals in deciding to accept a job opportunity in a new country. This often proves a significant impediment, because in some cases the trailing spouse may need to sacrifice his or her career plans in order to accommodate a move. Moreover, even if the family does decide to move, the spouse s inability to work may place additional strains on the family relationship causing a premature termination of employment in the new location. Example A Executive A joined AerCap in 2011, working at the LA office. He and his wife relocated to Dublin in October 2014, following the move of AerCap s Corporate Operations to Dublin. He is employed on a critical skills employment permit. His wife has duel U.S. and Russian citizenship. While in the U.S. his wife was employed in private jet leasing. In Ireland, it has proven virtually impossible for her to obtain work due to the fact she is unable to access a work visa. The impact of this on their day-to-day lives is very difficult. It has caused undue stress and discontent with living in Ireland. Page 4 of 6

5 Example B Executive B joined AerCap in 2012, working at the Amsterdam office. He, an American citizen, and his partner, an Australian citizen, registered their domestic partnership in the Netherlands. This allowed his partner to live and work indefinitely on the back of his working visa, with no strings attached. As a qualified school-teacher, she was able to find employment without any difficulty. He relocated to Ireland in April 2016 following the move of AerCap s Corporate Operations to Dublin. He is employed on a critical skills employment permit. His partner was not afforded the right to even live, let alone work, in Ireland. The solution to allowing them to continue to reside together in Ireland was to get married. As a stopgap measure, they were lucky enough to be able to apply for her to receive a Working Holiday Visa, which is afforded to persons under the age of 31 years old, from a variety of OECD countries. Under this visa scheme, as well as under the married spouse visa scheme, such individuals are allowed to reside in Ireland. They are also allowed to work under both these schemes. However there remains a form of employer sponsorship in order to achieve employment. This creates a further layer of difficulty and an additional burden on the employee, the spouse/partner, and the potential employer. 2) Lack of international schools and schools offering international baccalaureate programmes Education is another important factor in the decision to relocate. Senior managers place significant importance on the quality and portability of educational offerings available to their children. International schools or schools offering international baccalaureate ( IB ) programmes have become the gold standard among the global expat community as they offer a consistent curriculum from one country to another, and allow children to integrate into their new community with minimal academic disruption. Today, the number of schools in Ireland offering an IB programme is limited to just one second level school. Additionally the significance of IB programmes is that qualifications are easily transferable to other institutions and recognisable internationally - think Educational Passport. Recommended National Strategic Position The legal and tax environment has been a critical foundation for the development of the aircraft leasing and finance industry. It is a very mobile industry and our tax policy needs to continue to be responsive to competitor jurisdictions. It is in the strong interest of Ireland to attract and retain senior managers (i.e. decision makers) and other highly skilled employees who contribute to the tax base as well as to the overall Irish economy. It is important to develop a competitive offering for attracting overseas talent and retaining indigenous Page 5 of 6

6 talent, which includes a competitive income tax regime. We encourage the Steering Committee to give consideration to the changes suggested below to make the SARP regime competitive in practice, and to request that a review be undertaken as to what practical steps Ireland can take to retain talent in Ireland and attract high skilled talent from overseas with the objective of enhancing Ireland s proposition as a location for high value businesses. Requested Action by Steering Committee SARP-Related Recommendations (2) 1) Remove the 6-month requirement which is having an adverse impact on attracting required expertise to locate in Ireland. Elimination of this requirement will significantly expand the use of SARP and Irish competitiveness. In our experience no family is willing to move twice in twelve months. 2) Extend SARP relief from 5 years to 10 years to better match employment term and competitiveness with other jurisdictions. We recommend that the period of relief under SARP be extended to 10 years. Extending the period of relief will enable employers to retain employees. The tax burden after 5 years will make it extremely difficult to retain executives post 5 years. There must be a material financial incentive for an executive to move to Ireland. It will also encourage employees to become more integrated into the Irish community and therefore to make longer term investments here that will contribute to the Irish economy. Other Foreign National Employment Considerations (2) 1) Provide an expedited framework for spousal working visas. Modification of the existing visa rules to make it easier for a spouse to obtain a work visa is an important step to attracting skilled foreign multinationals with families. 2) Increase the availability of international schools and schools offering international baccalaureate programmes. We believe the Government should address this issue by encouraging more secondary schools to offer IB programmes. Over time, we believe the Government should also encourage the establishment of an international school in Dublin. Page 6 of 6