Oireachtas Joint and Select Committees

Wednesday, 6 November 2019

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2019: Committee Stage (Resumed)

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Deputy has raised this issue with me on a number of occasions. My decision not to make the change in recent budgets has been driven by cost as reducing the exit tax rate to 33% would have a full year cost of €25 million. Notwithstanding this potential Exchequer cost, there are other issues that I have had to take into account. As the Deputy will be aware, in 2018 a review was undertaken to compare financial products subject to DIRT and life assurance exit tax. The review concluded that the products subject to DIRT and life assurance exit tax are different in a number of respects, namely, the level and application of fees to clients, the level of risk and return and potential losses, and the way in which they are taxed. While there may previously have been similar rates of tax, the differences identified show that it is not simply the case that the two products are comparable because a similar rate of tax applied to them or that the rates are so inextricably linked that they should always be reduced in tandem. In summary, there were resource reasons for my decision not to pursue the course of action the Deputy advocates. Those issues aside, there are also policy matters that show that it should not be a given to make an inextricable link between the tax rates on both products.

That said, the Deputy's point on the potential long-term consequences of a tax differential is important and one we will need to consider. I am prepared to give this matter more detailed consideration through a paper in the tax strategy group process. I will have that paper done next summer and I will use it as a way to re-examine the issue in the run-in to next year's Finance Bill. There are some longer-term matters that we will need to take account of. In light of the commentary on what will happen to interest rates in the medium term, the tax differentials we are discussing take on a different context.