Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 31:

In page 38, between lines 2 and 3, to insert the following:“(3) The Minister shall, within three months of the passing of this Act, prepare and lay before the Oireachtas a report on the breaking of the link between the rate of DIRT and the rate of exit tax from life assurance policies, including the impact of this on life assurance savers.”.

I very much welcomed the reduction in DIRT tax announced in the budget and which is being legislated for in this instance. I know that there is not a consensus in the House on the issue and that some parties and individuals disagree with it. Many ordinary people, however, especially older people, rely on the interest income they earn from their savings and investments.

The link which has been in place for many years between the rate of tax on savings and the exit tax that applies to other investment products such as life insurance products has been broken. The 2% reduction in DIRT tax will not be applied to the exit tax applied to all such investment products. There has been a significant increase in the yield to the Exchequer from the exit tax on these products in recent years. In 2012 the yield was €43 million, but in 2015 it had risen to €247 million; therefore, the breaking of the link has been significant in a number of ways. If the Minister intends to continue to reduce DIRT tax to 33% in the next four years and the exit tax remains at 41%, there will be a significant difference between the various products. The exit tax applies to a lot of longer term products and many people formed the view, after seeking independent financial advice, that they needed to take a degree of risk to obtain a higher return.

That is what they do and they will now be paying a much higher rate of tax. They are also paying a 1% tax on the amount put into the fund or product. The purpose in tabling the amendment was to establish if it was a question of arithmetic, if it simply would cost too much to apply the deposit interest retention tax, DIRT, reduction to the exit tax applied to other products, or is it a new policy and is the Minister breaking the link for a particular reason? I know that there is real money involved. The full year cost of the DIRT reduction is €14 million and I established on Committee Stage that the cost of extending the reduction to the exit tax would be a further €11 million. I would like to know if it was a question of arithmetic, or is it a new policy and a new policy direction that the Government intends to take in separating the exit tax rate from the DIRT tax?

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