Pearse Doherty (Donegal South West, Sinn Fein) | Oireachtas source

I will move on to another point, but I disagree with the substance of the Minister's point about it being their own money. A portion of it is their own money; the remainder is made up of the State's contribution through tax reliefs. I will come back to that. This is a question of fairness. When an individual who has put money into a pension fund draws that down, whether it is an AVC, an approved retirement fund, ARF, or whatever, and they have to pay income tax at whatever rate they are on in addition to USC, that should apply to those individuals who had additional money to put into their pension pot. That is just a question of fairness.

The Minister said that applying the marginal rate in the legislation is high enough, but the legislation does not apply the marginal rate. The legislation allows for the standard rate to apply. I will not cite where it is in the legislation, but where an individual can show that they fall into the standard rate category, they can write to the Revenue and get it based at 20% instead of 41%. Let us deal with that.

I understand that a person who put money into an AVC two years ago got a 41% reduction in tax relief as well as a relief or a rebate in terms of PRSI that amounted to just over 2.5%. Therefore, the State contributed approximately 43% of their AVC. The reason many of them are looking for this money is that they have fallen on hard times. They might have lost their job. Many of them could be falling into the standard rate of tax and therefore the only tax that would apply on their rebate would be 20%. An issue of fairness arises in that respect in that they got the relief of 41% but the rate that would apply on the money withdrawn would be 20%. This is standard.

I want to quote from the Garda Representative Association's advice to its members on their AVC proposal. It gives tables on the profit one would make from investing €10,000 in an AVC, which is €4,095. That is because of the tax relief I mentioned earlier. It refers to a member who retires. This is the GRA and therefore we are talking about gardaí. I am not picking on gardaí. We know the average wages members of the Garda are on, which are not in any way excessive. It states:

When a member retires, with 30 years service, his annual pension is calculated as 50% of his superannuation earnings. [That is the same with all public sector workers]. This puts a member with no other income firmly in the 20% tax bracket. Your AVC plan uses this position by allowing you put money you earn today and is taxed @ 41% into an AVC account, get full tax and PRSI relief on the contribution which is given automatically by garda pay, and then draw down the money after retiring at 20% tax.

In terms of the argument about tax reliefs for pensions, it is supposed to be a deferred taxation payment but in reality it is not because they get the relief at 41% and then because the income of their pension is below the threshold for marginal tax, they are only paying 20%. That is a wider issue that we need to deal with in the future, but my concern is that many people who would withdraw money from their AVCs will also fall into this bracket. They will have got the marginal tax relief if they put €10,000 into an AVC. The State gave them €4,100 back in tax relief, and the rebate on PRSI is 2%, which is another €200. Basically, the State contributed that money to their AVC on their behalf in the expectation that when they draw down the money, they would get the money back through the tax, but what will happen is that it will only get €2,000 of it back, which is the standard rate of tax.