Bertie Ahern (Dublin Central, Fianna Fail)

I move:

(1) THAT, as respects the year of assessment 2007 and subsequent years of assessment, section 122 of the Taxes Consolidation Act 1997 (No. 39 of 1997) is amended by substituting in the definition of "the specified rate" in paragraph (a) of subsection (1)—

(a) "4.5 per cent" for "3.5 per cent" (inserted by the Finance Act 2004 (No. 8 of 2004)) in both places where it occurs, and

(b) "12 per cent" for "11 per cent" (inserted by the Finance Act 2003 (No. 3 of 2003)).

(2) 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).

This resolution amends the specified rate used to calculate the taxable benefit to employees, usually bank employees, for example, from loans provided by their employers at below the market rates of interest. Where an employee receives such a loan at a rate which is below the specified rate, the employee is chargeable to tax on the benefit-in-kind reflected by the difference.

The specified rate, which is differentiated as between home loans and other loans, is reviewed annually in the light of the rates available in the marketplace to ensure that it remains within the range of market rates. The review this year showed that home loan rates have been rising and are now in the range of 4.24% to 4.53%. That is up 1% on the last market rates of 3.25% to 3.56% when it was reviewed this time last year. In line with this, it is proposed to increase the specified rate for home loans by 1%, that is, from 3.5% to 4.5%.

In regard to other loans, the A category overdraft rate used to determine the specified rate for such loans has also increased and is now in the range of 10.8% to 12.2% or 12.25%, increased from a range of 10% to 11.65% at this time last year. The specified rate on these loans is also being increased by 1% from 11% to 12%. This change will take effect from 1 January 2007 for the year of assessment of 2007 and subsequent years. The 1% rate in the specified rate will result in an increased yield to the Exchequer from benefit-in-kind in respect of this type of loan, up €3 million in 2007 and €4 million in a full year. In other words, this is an annual review of those individuals who benefit, almost exclusively bank employees, from loans their employers give them at below market rates of interest. It has not been changed for the past few years because there was no need based on the calculation. This year there is a need, and it is as per the figures I have given.

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