Written answers

Tuesday, 20 November 2007

8:00 pm

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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Question 82: To ask the Tánaiste and Minister for Finance the estimated cost of mortgage relief given by way of tax relief at source in 2008, if the average ECB rate in the year is 5%. [29564/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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As the Deputy will be aware, the determination of interest rate policy is solely a matter for the Governing Council of the European Central Bank, which is independent in these matters. Accordingly, I do not believe it would be appropriate for me to speculate on ECB interest rate movements in 2008 or their impact on the cost of mortgage interest relief for next year. I am informed by the Revenue Commissioners that the cost of mortgage interest relief in 2007 is expected to be approximately €560 million.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 83: To ask the Tánaiste and Minister for Finance the number of persons claiming tax relief on pension contributions; the income category these persons fall into; the value of the tax relief and the tax revenue foregone to the Exchequer; the comparative figures for each year from 2002 to date in 2007; and if he will make a statement on the matter. [29558/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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As part of the work on the Green Paper on Pensions, a review was carried out into the current regime of incentives for supplementary pension provision. This was done with a view to developing more comprehensive and reliable estimates of the cost of reliefs in this area. The review examined, among other things, the current reliefs and incentives for investment in supplementary pensions and the data available on which to base reliable estimates of the costs in revenue foregone to the Exchequer.

The review also drew on newly-available 2006 aggregate data on contributions to pension schemes by employers and employees arising from a P35 initiative introduced on foot of provisions that were included in Finance Act 2004 which aimed to improve data quality. Arising from the review, the following estimates of the cost of tax and other reliefs for private pension provision for 2006 have been made, together with the numbers of contributors in respect of whom tax relief is provided on contributions, to the extent they are available. Further work will be necessary to provide similar estimates for 2005 and I understand that this is ongoing.

As similar data sources would not be available for previous years, it is not possible to provide costings on a similar basis for those years.

Estimate of the cost of tax and PRSI reliefs for private pension provision 2006.
Estimated costsNumbers*
€million
Employees' Contributions to approved Superannuation Schemes540680,000
Employers' Contributions to approved Superannuation Schemes120362,000 **
Estimated cost of exemption of employers' contributions from employee BIK510362,000
Exemption of investment income and gains of approved Superannuation Funds1,200Not available
Retirement Annuity Contracts (RACs)380'06 not available
Personal Retirement Savings Accounts (PRSAs)12071,500
Estimated cost of tax relief on "tax-free" lump sum payments130
Estimated cost of PRSI and Health Levy relief on employee and employer contributions220Not available
Gross cost of tax relief3,220
Estimated tax yield from payment of pension benefits320
Net cost of tax relief2,900
*Numbers as included in P35 returns from employers to Revenue for 2006. Figures are as verified to date but may be understated and are subject to revision.
**Numbers of employees for whom employers are contributing to occupational pension funds as included in P35 returns to Revenue for 2006.

The breakdown and make-up of the estimated cost of reliefs set out in the table of 2006 estimated costs differ from presentations of costs in this area for previous years in a number of respects and are not directly comparable. For further details on the cost of tax and other reliefs and the changes in the methodology, I would refer the Deputy to pages 106 and 107 of the Green Paper on Pensions which was published last month and which is available at www.pensionsgreenpaper.ie.

I am informed by the Revenue Commissioners that it is not possible to provide disaggregated figures in regard to the take-up of the tax relief for all pension contributions across different income categories because the relevant data in regard to contributions is not captured in such a way as to make this possible. The latest relevant information available in this area is in respect of income tax relief allowed for contributions to Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) for the income tax year 2004, as returned for that year by individuals in personal income tax returns. RACs and PRSAs are available to the self-employed and to employees not in occupational pension schemes.

A distribution by income ranges of the number of cases, amount of deduction and reduction in tax for tax relief for RACs and PRSAs is contained in the tables that follow this reply. The information is based on income returns on Revenue records at the time the data were compiled for analytical purposes, representing about 96% of all returns expected. A married couple who has elected or has deemed to have elected for joint assessment is counted as one tax unit.

INCOME TAX 2004
Retirement Annuity — by range of Gross Income.
Range of gross incomeTotals
FromToNumber of casesAmount of deductionReduction in taxGross tax*Reduction in tax as a % of Gross Tax
%
9,0001,1101,765,598100,854102,71798.2
9,00010,000328473,53050,20957,62987.1
10,00012,0008011,200,100159,282233,81568.1
12,00015,0001,7682,856,885429,099888,46648.3
15,00017,0001,5842,707,813413,3671,051,53939.3
17,00020,0003,0715,511,150965,6862,972,94632.5
20,00025,0006,64412,238,6352,317,3609,500,84724.4
25,00027,0003,0536,086,9981,181,8645,673,14020.8
27,00030,0004,87110,061,0222,170,19511,018,83519.7
30,00035,0008,44019,287,3645,246,70126,229,04320.0
35,00040,0008,22221,768,1076,637,36834,470,68018.5
40,00050,00014,59246,359,97614,805,94985,717,76417.3
50,00060,00012,06145,846,33014,774,52097,776,50615.1
60,00075,00013,51867,197,52325,455,241157,205,19616.2
75,000100,00011,85685,513,97635,192,079215,796,00416.3
100,000150,0008,570108,513,97645,430,331264,196,85117.2
150,000200,0003,42973,550,19230,834,464174,218,30117.7
200,000250,0002,05263,087,56226,460,842141,462,36418.7
Over250,0004,526224,633,57094,263,399669,190,25814.1
Totals110,496798,852,174306,618,8101,897,762,90116.2
*"Gross tax" means the tax that would be due
INCOME TAX 2004
Personal Retirement Savings Accounts — by range of Gross Income.
Range of gross incomeTotals
FromToNumber of casesAmount of deductionReduction in taxGross tax*Reduction in tax as a % of Gross Tax
%
9,0007093,5411,3581,358100.0
9,00010,0002334,2124,0844,15198.4
10,00012,0004759,6688,78214,34561.2
12,00015,000109156,08423,46360,47238.8
15,00017,000108156,64726,45176,74934.5
17,00020,000218313,19856,805230,59924.6
20,00025,000413690,775135,922665,31720.4
25,00027,000172287,23356,570378,18115.0
27,00030,000284523,396118,565732,50316.2
30,00035,0004891,152,111347,8021,748,49819.9
35,00040,0004411,248,937423,8122,141,62119.8
40,00050,0007142,339,244792,1114,750,53416.7
50,00060,0006162,500,273830,6545,568,93214.9
60,00075,0006963,534,3831,381,5178,683,99715.9
75,000100,0006884,800,3751,999,96313,239,78515.1
100,000150,0004795,027,3062,111,21515,236,92613.9
150,000200,0001963,179,5301,334,56310,016,14413,3
200,000250,000972,387,4071,000,6216,516,03815.4
Over250,0001886,011,5142,524,83624,927,04910.1
Totals6,04834,495,83413,179,09494,993,19910.1
*"Gross tax" means the tax that would be due
*Figures for PRSAs reflect the relative early stage of the scheme which was introduced in 2002.

Photo of Tommy BroughanTommy Broughan (Dublin North East, Labour)
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Question 84: To ask the Tánaiste and Minister for Finance the position in relation to landlords resident outside the State where the tenant is required to deduct 20% of their rent as tax and pay this to the Revenue Commissioners on the landlord's behalf; if his attention has been drawn to the fact that effectively it appears as though the tenant is required to discharge the landlord's tax liability in respect of the letting; if he has reviewed this particular arrangement; his views on whether it is fair; if he proposes to make changes; the number of tenants who pay rent to non-resident landlords; and if he will make a statement on the matter. [29561/07]

Photo of Ciarán CuffeCiarán Cuffe (Dún Laoghaire, Green Party)
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Question 145: To ask the Tánaiste and Minister for Finance if, with regard to the rent relief scheme and the requirement for tenants to deduct 20% of the gross rent payable directly to their landlord's bank account when their landlord is non-resident, he will clarify the number of non-resident landlords engaged in tenancies here; and if he will make a statement on the matter. [29554/07]

Photo of Ciarán CuffeCiarán Cuffe (Dún Laoghaire, Green Party)
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Question 146: To ask the Tánaiste and Minister for Finance if, with regard to the rent relief scheme and the requirement for tenants to deduct 20% of the gross rent payable directly to their landlord's bank account when their landlord is non-resident, he will clarify the number of cases where rent relief has been withheld from tenants through the failure to deduct tax; the number of these cases that have been appealed to the Revenue Commissioners; and if he will make a statement on the matter. [29555/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 84, 145 and 146 together.

I am informed by the Revenue Commissioners that where rents are paid directly to a person who is resident outside the State, the tenant is obliged to deduct income tax at the standard rate of 20% from the rental payment and to give the landlord a certificate of the tax deducted. Direct payments include a situation where rent is paid into a bank account in the name of the non-resident landlord. The tenant is then required to make a return and pay to Revenue the tax that he or she has deducted from the rent. The landlord is entitled to a credit for the tax deducted by the tenant against his or her final rental income tax liability and is obliged to pay any additional tax that may be due.

The tenant is not responsible for discharging the landlord's liability to tax on rental income. Instead, the withholding of tax on rental income by tenants of non-resident landlords is primarily a control measure. It is designed to promote greater compliance in this area having regard to the obvious risk factors associated with non-resident taxpayers. Where it applies, it provides in a very direct manner, valuable information for Revenue which might otherwise be difficult to obtain.

Where rent is paid to an Irish agent of a non-resident landlord, such as an Irish-based estate agent acting on behalf of the non-resident landlord, the tenant is not required to deduct income tax from the rent payable. In such cases, the non-resident landlord is chargeable to tax in the name of the Irish agent.

With regard to the question of reviewing this arrangement, I should point out the operation and impact of the assessment and collection of taxes are monitored and/or subject to review on an ongoing basis as part of the normal work of my Department and the Revenue Commissioners.

I am also informed by the Revenue Commissioners that they do not have complete information on the number of tenants who pay rent to non-resident landlords and the number of non-resident landlords engaged in tenancies here. According to the annual returns of income for non-PAYE taxpayers for the year 2005, the latest year for which information is available, gross rents of €1.1 million were payable to non-resident landlords by 113 taxpayers.

The amount of income tax that may have been withheld by tenants is not separately identified. Revenue does not have similar information for PAYE taxpayers. Following an amendment to the return of income (Form 11) for the year 2006, non-resident landlords when completing a return of income will have to indicate the amount of income tax that was withheld from rents paid by their Irish tenants and the PPSN(s) of tenants who deducted tax from rent payments. Likewise, the return of income for PAYE taxpayers (Form 12) for 2006 has also been amended to request details of the gross rent paid to non-resident landlords in 2006. This information will be available early in 2008.

Inclusion of this information on Tax Returns for 2006 and subsequent years will enable data to be collected, which should result in more information becoming available in due course on the number of non-resident landlords engaged in tenancies in this jurisdiction.

The Revenue Commissioners have informed me that they are not aware of any situation where a rent credit relief claim has been refused on the grounds of failure on the part of the tenant to deduct tax from rent payable to a non resident landlord. On the question of the number of appeals, it follows that, as there have been no refusals, there are no appeals.

If the Deputy has information that Rent Relief has been withheld because of a failure to deduct tax, he should supply details to the Revenue Commissioners who will investigate the matter further.

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