Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

Yes, and the Minister can reply. I am satisfied with that and note the proposals are significant but quite straightforward. I will speak to them in sequence. Resolution No. 10, on which the Minister spoke in detail, in layman's English is about increasing the rate of deposit interest retention tax, DIRT, which currently is at 30%, by 3% to 33%. Based on the Minister's statement today and the schedule on page A11 of the summary of the budget measures regarding deposit interest retention tax and exit tax on life assurance policies and investment funds recovered here, it proposes an increase in the rate of retention tax that applies to deposit interest, as the Minister already mentioned. It also will apply to life assurance policies and investment funds and the rates are being increased by three percentage points from 30% to 33% for payments made annually or more frequently and 36%, as the Minister already has mentioned, for more complicated cases in which the rate is only calculable at different intervals. Moreover, these increased rates will apply from 1 January 2013 and are expected to yield €50 million in the first year and €64 million in the second year.

These changes are broadly in line with the budget proposals put forward by Fianna Fáil. Another reason I consider this measure to be a good idea is that in the first instance, it constitutes taxation on people with large amounts of money sitting in the bank. It might actually encourage them to withdraw some of it and spend or invest it, thereby helping the economy. While I acknowledge the interest rate is quite low at present, increasing the DIRT rate might encourage people to get better use from their funds by putting them to use in the economy. This was one reason Fianna Fáil proposed an increase in the rate of DIRT. This point also essentially covers Financial Resolution No. 11 on the same basis.

Financial Resolution No. 12 proposes a change in the rate of capital gains tax, whereby the current rate of 30% also is to be increased by 3% to 33% and this increase will apply in respect of disposals made after tonight. If someone can get the documentation signed between now and midnight, the old rate will apply but otherwise, they will be caught with the new rate. I may not be technically correct in saying that but I understand this measure will come in from midnight tonight.

This will produce approximately €50 million in any year and we broadly support it. We recommended such a measure in our budget proposal because a gap of €3.5 billion cannot be closed without some additional taxes. As I indicated earlier, we agree with the principle of closing the €3.5 billion gap, so it would be irresponsible to vote against every specific detail. We will put our money where our mouth is by saying we support this increase in capital gains tax.

Some people may believe we should tax all capital out of existence but a capital gains tax of 33% is reasonable enough. It is a significant increase on the existing rate, which is moving towards the marginal rate rather than the lower rate. We could talk forever about the reduction in capital gains tax from 40% to 20% effected by my former colleague. It led to a phenomenal increase in yield, although the economy may have been improving at the time so more transactions were always going to happen.

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