Richard Bruton (Dublin North Central, Fine Gael)
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Question 154: To ask the Minister for Finance the cost of tax relief or pension contributions; the cost and numbers of self employed people gaining pension tax relief; the amount of contributions and claimants for the self employed claimed at the 20% rate are at the 42% rate; the cost and numbers of persons in employer pension schemes gaining pension tax relief; and the amount of contributions and claimants getting relief at the 20% rate and the 42% rate; the cost and numbers of people claiming under PRSA schemes; and the amount of contributions and claimants receiving relief at the 20% rate and at the 42% rate. [33808/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am informed by the Revenue Commissioners that the latest relevant figures available are in respect of the income tax year 2003. The total cost of tax relief on pensions contributions is tentatively estimated at approximately €2.9 billion. This total figure is broken down as follows both in terms of numbers where available and in terms of costs.

This cost covers tax relief on contributions by employers, employees and self employed and the exemption from income and gains in the pension funds. It should be noted that these costs are very tentative and that efforts are being made to improve information on the cost of tax relief for pensions. With regard to occupational pensions, that is, schemes set up by the employer, the figures in respect of employee and employer contributions are available only in aggregate form on a tentative basis. Information on such contributions is not captured in such a way as to make it possible to provide disaggregated figures by tax rate. A breakdown of the figures by tax rate is only available at present in respect of the tax relief for contributions to Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs). RACs are used by the self-employed and by employees who are not in pensionable employment. The Personal Retirement Savings Account (PRSA) was introduced by the Government in 2002 as a flexible low cost portable pension product. The available data is set out in the following tables:

The lower aggregate figures in these tables (compared to the slightly higher figures for RACs and PRSAs in the opening table) are taken directly from filed income tax returns which represent about 98% of all income tax returns expected for 2003. The higher figures in the initial table have, in accordance with normal practice, been grossed-up at aggregate level to adjust for this 2% incompleteness. The designation of a tax rate to claimants is based on identifying the top tax rate applying to the taxable income of each claimant. To arrive at the figure for taxable income, the gross income is reduced by various relevant deductions and allowances such as capital allowances, losses, allowable expenses and retirement annuities. In some cases, these will reduce the taxable income to nil and this reduction itself gives rise to a cost in terms of tax forgone.

Tax relief for pension contributions by employees is normally given by way of a deduction from total income in arriving at income for tax purposes i.e. the income for tax purposes of employees is net of their pension contributions (the "net pay" arrangement). The employer's contributions are an allowable deduction from profits and are not specifically recorded in Revenue statistics. However, provisions were included in Finance Act 2004 with a view to improving data quality and transparency without overburdening taxpayers/employers. The Act includes provisions that require employers to provide data on superannuation contributions in the P35 form to be filed by employers in February 2006. These changes will yield additional information regarding the overall cost of tax relief for pension contributions but as the returns will be aggregated at employer level they will not provide a precise basis for measuring the potential impact on the Exchequer of proposals for changes at individual level. Work on developing the necessary technical enhancements to the Revenue computer system to enable this data to be captured is ongoing.