Richard Bruton (Dublin North Central, Fine Gael)
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Question 107: To ask the Minister for Finance the basis of tax to be levied on single premium investments at eight year intervals; if this tax is discriminatory compared to persons who invest in stocks and shares. [3287/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Finance Act 2000 introduced changes to the way in which tax was paid on life policies taken out after 1 January 2001 (the gross roll up regime). Under gross roll up, no tax is charged on investment proceeds during the term of the investment, but an exit tax (of 23%) applies on the net investment proceeds paid to a policy holder when the policy matures or when rights under the policy are surrendered or assigned.

Changes were introduced in Finance Act 2005 which added a new chargeable event providing for the calculation of the gain and the collection of the tax. The new event was the ending of each 7-year period following the inception of the policy and this was subsequently increased to 8 years in Finance Act 2006. The purpose of this was to ensure that exit tax could not be deferred indefinitely by the continual rolling over of a life assurance policy without it becoming chargeable to tax.

An individual investing in stocks and shares pays income tax at his or her marginal rate of tax on all income arising on such investments. In addition, capital gains tax arises on the gain arising from the eventual disposal of the investments. These different tax treatments, as between an individual investing in stocks and shares as against his or her investing in a collective investment vehicle, such as a life assurance fund, are very long-standing and I do not regard the different treatments as discriminatory.