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Financial Resolution No. 7: Income Tax (Continued)

Tuesday, 15 October 2013

Dáil Éireann Debate
Vol. 817 No. 1

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(Speaker Continuing)

[Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett] If I understand correctly the Minister's officials, whom I questioned on this earlier, while this resolution does not deal with the substantive issue of the increase in DIRT that the Minister is proposing, it is essentially facilitating it by removing exemptions that he believes could be used by people trying to escape the increase. This is a pre-emptive move to ensure that as many people as possible, if not everybody, can be hit with the DIRT increase the Minister is proposing in the finance Bill. That is my concern and suspicion. I would like the Minister to elaborate on it. If what I contend is untrue, he should assure us that this measure will not essentially assist him in another grab at the modest savings or nest eggs of ordinary people, particularly the elderly, who may have spent a lifetime acquiring them. These sums are already subject to DIRT but the Minister now wants to make them subject to an even higher rate.

Deputy Joe Higgins: Information on Joe Higgins Zoom on Joe Higgins I have one or two questions. The Minister mentioned a number of exemptions. Will he confirm that, for everybody other than those exempt, the DIRT, at 41%, represents a quite indiscriminate tax hit, including on a young person or partners saving desperately to buy a home and who might have €10,000 or €15,000 accumulated and who might be trying to accumulate more. The Minister mentioned two types of accounts, one of which is related to the credit union. He mentioned two interest thresholds under which DIRT would not apply. One was €650. Could he repeat his point? The Deputies who have been here for hours should really have received briefing notes on the seven financial resolutions, which are very technical. We should have had a briefing note on the measure on health insurance, giving us more detail. The approach is not acceptable. Could the Minister repeat the two types of accounts and the two figures up to which interest would be exempt from taxation? What amount would have to be in an account to reach the threshold of €650?

Like Deputy Boyd Barrett, I would not have any problem whatsoever with a wealth tax. We have been calling for it. I am referring to large accumulated deposits. However, the few thousand euros or even the €10,000 or €12,000 that many elderly people have put together over many years or that ill people have put together to have a few bob to bury themselves, as they say in the country, should not be hit, nor should the savings of small depositors who might be in rude good health. These people are in a different category completely from those who hold the real wealth that we demand should be hit but which has not been hit by this Government.

Deputy Róisín Shortall: Information on Róisín Shortall Zoom on Róisín Shortall Following on from Deputy Michael McGrath's question, I did not hear the full exchange but would like the Minister to clarify whether PRSI will apply to savings such that DIRT and PRSI combined will result in a tax rate of 45% on savings.

I agree that the approach is wholly unsatisfactory as a means of dealing with very significant budgetary proposals. No briefing at all has been provided. There is no explanatory memorandum for the seven Financial Resolutions. I agree with the point made by Deputy Joe Higgins that we need clarification on the exemption limits. Will they apply to the PRSI element that will now be applied to savings?

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton I thank the Deputies. Let me work backwards. I read out the note, which basically states PRSI will not apply in respect of PAYE and where one's PAYE-related income is insignificant in amount. The measure will apply only where a self-employed person is making a return in respect of which he is obliged to include all his income, which would include interest. He would then be required by the Revenue Commissioners to make return as a chargeable person subject to self-assessment. However, PAYE workers would not normally have a PRSI liability.

Deputy Róisín Shortall: Information on Róisín Shortall Zoom on Róisín Shortall For self-employed people, is that 45%?

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton For self-employed people who would be chargeable, PRSI would apply.

Let me deal with the point that Deputy Higgins made. There are two categories subject to an exemption, one of which is a three-year deposit account. The first €480 in interest earned on the account per annum is exempt. The other category is a five-year account, in respect of which the exemption limit is €635 per annum. I suppose the interest rates on such accounts would be approximately 3%. A three-year account will earn interest of approximately 3%. Therefore, one is talking about approximately €15,000.

Deputy Ray Butler: Information on Ray Butler Zoom on Ray Butler Twenty thousand euro.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton There is the man who knows how to calculate the odds.

On Deputy Richard Boyd Barrett's point, those who already have the accounts in question will continue to be subject to the exemption. Therefore, if someone has just bought a three-year product, the exemption will apply until the end of the lifetime of that product. The same applies to a five-year product. There will be a deduction before DIRT kicks in. That provision will not apply to new products issued. That is basically the position.

Deputy Joe Higgins: Information on Joe Higgins Zoom on Joe Higgins What the Minister is trying achieve is completely unacceptable. He stated that up to €650 per annum in interest will be exempt on a five-year account. At a rate of 3%, €650 would involve a deposit of up to €21,300. That is the relief that has obtained to date. The deposit could easily be that of young people or working people trying to put a house deposit together. It is not real or massive wealth. What is occurring is completely unacceptable. The Minister stated the figure pertaining to a three-year deposit account is €480. This would be associated with a deposit of €16,000 at a rate of 3%. These are very modest amounts of money in the present context, in which people require relatively large deposits to purchase a home, if they want a home of their own, or to start a family.

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