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

I move amendment No. 41:

In page 145, between lines 32 and 33, to insert the following:“The linking of DIRT rate and exit tax rate on life assurance policies

62.The Minister shall, by the end of 2018, 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.”.

The purpose of my tabling this amendment on Report Stage is to try to firm up the answer to the question as to when the Minister expects to deliver the report to which he has committed. To recap very briefly on this issue, it relates to the exit tax on certain life assurance products, in particular long-term investment products. Until recent years the exit tax rate was aligned with the rate of DIRT. The Minister's predecessor announced a four-year cycle of 2% reductions in DIRT. When the most recent reduction comes into effect in January, DIRT will therefore be down to 35% but the exit tax will remain at 41%. In 2020, DIRT will be down to 33%, so the gap will get bigger because exit tax will remain at 41%.

There is a policy issue here which we have discussed a number of times in that the differential in the tax treatment of the return from both these products will essentially encourage consumers to put their money into bank-type savings products, on which the return at present is as close to zero as makes no difference. We therefore need to examine the policy implications of this because we want to encourage longer-term saving, longer-term commitment to investment products and so on. The Minister has committed to a report to try to tease out the policy implications. Obviously, there are fiscal implications of doing anything, and I think this is why he has not done anything by way of trying to realign the rates. I believe, however, that we need to give some attention to this in a policy context and then in future budgets to revisit the decisions that have been made.

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