Pat Carey (Dublin North West, Fianna Fail)

There are various reasons for the increase of three percentage points in the DIRT rate. It was necessitated by general budgetary constraints. The Minister announced in his budget speech that this overall measure, including the increase on collective investment funds and life assurance products, would raise €85 million in 2009. The capital gains and capital acquisition tax rates were increased by 2%. While the DIRT rates were increased by 3%, unlike other types of income, the 1% levy does not apply to deposit interest.

The Minister was also influenced by the fact that general levels of deposits in banks are currently high. This specific recommendation applies to deposit interest earned on savings and special term accounts only. Based on this recommendation, deposit interest retention tax would be charged on interest earned on those accounts at a rate of 22% rather than 23%, as is currently proposed in section 26. The other rate change provided for in section 26, which relates to the vast majority of deposit accounts, would remain unaltered. This amendment would also favour special savings and special term accounts over similar accounts held in credit unions. The accounts covered by the amendment already benefit from favourable treatment.

Regarding special term accounts, part of the interest earned on such accounts is exempt from DIRT. In the case of a deposit held in a medium term account, the amount is €380 and €635 where the deposit is held in a long term account. Interest on both special savings and special term accounts is not liable to PRSI or health levies. It has not been possible to open a special savings account since 1 April 2001. For those reasons, the Minister for Finance, Deputy Brian Lenihan, is unable to accept the recommendation.