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 Header Item Financial Resolution No. 6: Income Tax (Continued)
 Header Item Financial Resolution No. 7: Income Tax

Tuesday, 15 October 2013

Dáil Éireann Debate
Vol. 817 No. 1

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Minister for Jobs, Enterprise and Innovation (Deputy Richard Bruton): Information on Richard Bruton Zoom on Richard Bruton I move:

Financial Resolution No. 7: Income Tax

(1) THAT section 261A of the Taxes Consolidation Act 1997 (No. 39 of 1997) shall only apply as respects interest paid by a relevant deposit taker in respect of a relevant deposit held in a special term account that is opened before 16 October 2013.

(2) THAT section 267C of the Taxes Consolidation Act 1997 (No. 39 of 1997) shall not apply to dividends paid by a credit union in respect of shares held in a special term share account that is opened on or after 16 October 2013 unless those dividends are paid in respect of shares held in a long term account that was converted from a medium term account that was opened before 16 October 2013.

(3) THAT for the purposes of paragraphs (1) and (2) of this Resolution, “interest”, “relevant deposit taker”, “relevant deposit”, “special term account”, “dividends”, “medium term account”, “long term account” and “special term share account” have the same meaning, respectively, as in Part 8 of the Taxes Consolidation Act 1997.

(4) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton Current tax law provides for an exemption for a part of the interest paid on special term accounts offered by banks and special term share accounts offered by credit unions. In the case of a medium term account, where the money is held on deposit for at least three years, the first €480 of interest earned on the account is exempt while, in the case of a deposit held in a long-term account, where the minimum holding period is five years, the exemption limit is €635.

Financial Resolution No. 7 removes these exemptions from special term accounts that are opened on or after 16 October. This is to ensure that such accounts cannot be used to avoid payment of deposit interest retention tax, or DIRT as it is commonly referred to.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath I thank the Minister for his comments. I wish to ask a few questions to clarify the position. First, why is there not any anticipated yield from this measure? The Minister said it is to prevent persons using these accounts to avoid paying DIRT and as a consequence, why is there not any yield from it?

On the overall issue of increasing DIRT to 41%, could the Minister clarify whether that it is a matter that will be dealt with in the finance Bill? An associated issue is PRSI on unearned income which was announced in last year's budget. Will that also apply to deposit interest earned, which is separate to DIRT? Could the Minister confirm that the change does not in any way affect the various State savings products?

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton I presume the reason there is no yield is because it is an anti-evasion measure to avoid people shifting money. In that sense, it is not designed to generate revenue.

Deputy Billy Kelleher: Information on Billy Kelleher Zoom on Billy Kelleher The Minister should have put it in the Department of Health in that case.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton I beg the Deputy's pardon.

Deputy Billy Kelleher: Information on Billy Kelleher Zoom on Billy Kelleher It is nothing.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton The provision for the increase in the deposit interest retention tax to 41% will be contained in the finance Bill. That would be normal. I will confirm the position with PRSI-----

Deputy Michael Healy-Rae: Information on Michael Healy-Rae Zoom on Michael Healy-Rae The Minister could allow the official to answer all the questions.

Deputy Mattie McGrath: Information on Mattie McGrath Zoom on Mattie McGrath The permanent government.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt The Minister has the floor.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton I am trying to provide the House with accurate information. The information has been provided already and it is just confirmed by the note to be accurate. That might be reassuring for the Deputy.

Deputy Tom Hayes: Information on Tom Hayes Zoom on Tom Hayes Deputy McGrath would like it to be correct.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton That is the situation.

Deputy Ray Butler: Information on Ray Butler Zoom on Ray Butler Deputy Healy-Rae would know a lot about it.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath My question is on PRSI.

Deputy Mattie McGrath: Information on Mattie McGrath Zoom on Mattie McGrath I would know as much as Deputy Butler anyway.

Deputy Ray Butler: Information on Ray Butler Zoom on Ray Butler Dumb and dumber.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton PRSI is a matter for the Minister for Social Protection who will bring forward legislation shortly to deal with the situation for 2014. It is my understanding that PRSI will be charged on DIRT income that is subject to assessment by the Revenue Commissioners. The income will be included in the tax return of chargeable persons and subject to self assessment. Chargeable persons are individuals who are in receipt of income which has not been fully subject to tax under the PAYE system. The Revenue Commissioners allow individuals in receipt of PAYE income who also have insignificant non-PAYE income that has been notified to Revenue to have that income coded in the PAYE system and, as such, they are not chargeable persons and will not have a PRSI liability. PRSI is not payable by individuals over 66 years of age and, as such, pensioners are not liable to pay PRSI on deposit interest income. There is an income threshold for pensioners, those aged over 65, in the tax code. It is €36,000 for a couple and €18,000 for a single person. DIRT would not be collected from people whose income is below that level.

Certain State saving accounts are tax free and are not subject to DIRT. They are savings certificates, savings bonds, instalment savings, final payment on national solidarity bonds and prize bond winnings. The annual interest on national solidarity bonds and interest on normal post office saving bank accounts are subject to DIRT.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett I seek clarification on the resolution. I have no difficulty whatsoever, and in fact am positively in favour of increased taxes on large amounts of accumulated wealth in deposit accounts or anywhere else, but I would not be in favour of anything that would hit relatively modest savers, in particular older people - this seems to be a theme of the budget - who might have built up a modest amount of savings for their old age, but that might come into the net for the planned increase in DIRT.


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