Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance the amount of money that would be raised in a full year by reducing the level at which persons and companies may claim interest repayments against tax for residential rental properties from 75% to 40%; and if he will make a statement on the matter. [42328/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that a breakdown between rent received from residential property and other types of property is not sought or provided in tax returns. However based on personal income tax returns filed by non-PAYE taxpayers and corporation tax returns filed by companies for the year 2010, the latest year for which this information is available, and making certain assumptions about the data it is estimated that the revenue that would be raised from reducing the level at which individuals can claim interest repayments against tax for residential rental properties from 75% to 40% could be in the region of €157m. Rental income of companies is returned as net of interest on borrowings the figures for interest are not separately distinguished in corporate tax returns. There is, therefore, no basis on which an estimate of the cost of reducing the tax relief involved could be provided. The estimated cost of 2010 residential interest relief is based on assuming that tax relief was allowed at the top income tax rate of 41% and the figure provided could therefore be regarded as the maximum Exchequer cost in respect of those taxpayers. This figure is subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.

It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figure provided in this reply in respect of individuals.

The level at which interest repayments can be claimed against tax for residential rental properties was reduced from 100% to 75% in section 5 of the Finance Act 2009.

There is no specific proposal in the Programme for Government to decrease the amount of interest on borrowings that can be offset against rental income for tax purposes, however, as a matter of course all such taxation measures and reliefs are considered in the context of the budgetary process.

Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance the amount of money that would be raised in a full year by reducing the tax exemption for lump sum pension payments to the level of the average industrial wage with the balance taxed at the marginal rates of income tax; and if he will make a statement on the matter. [42329/12]

Michael Noonan (Limerick City, Fine Gael)
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The following arrangements currently apply to retirement lump sums paid under pension arrangements approved by the Revenue Commissioners. Lump sum amounts up to €200,000 are paid free of tax. They are also paid free of USC. The portion of a lump sum between €200,001 and €575,000 is taxed on a ring-fenced basis at 20%. This means that no tax credits or other tax reliefs can be set against this portion of the lump sum. No USC is chargeable. Any amount of a lump sum in excess of €575,000 is taxed at the individual’s marginal rate of tax (credits and other tax reliefs are available). In this instance, USC is chargeable on the excess. These amounts are lifetime amounts with prior lump sums aggregating with later lump sums. Based on certain assumptions the average annual industrial wage is estimated at about €31,000 in 2011. As there is no general requirement for data on retirement lump sums of less than €200,000 to be returned to my Department or to the Revenue Commissioners, I am not in a position to provide definitive figures on the Exchequer impact of reducing the tax-free retirement lump sum amount from €200,000 to €31,000. Furthermore, details of the marginal rate of income tax an individual would pay on a taxable lump sum pension payment in the scenario outlined in the Deputy’s question are not available.

As an exercise that might provide some indication of the scale of the savings involved, it is estimated that just over 268,000 individuals in the public service would be on salaries of over €20,750 and less than €133,500 which, under existing pension scheme arrangements generally applying across the public service, would deliver retirement lump sums of between €31,000 and €200,000. If it is assumed that these individuals would retire in line with retirement trends from the public service in a normal year (about 2.5%), then the additional tax yield from taxing lump sums in excess of €31,000 at 20% could be approximately €100 million in a full year. In this example the additional tax yield from taxing lump sum payments in excess of €31,000 at 41% could be approximately €200 million.

I have no data on which to provide a similar estimate in relation to the private sector. I should point out, however, that one significant difference between public sector and private sector pension schemes is that private sector schemes invariably allow scheme members the option of commuting part of their pension fund for a tax-free lump sum. This option is not available to members of public sector schemes. Depending on the impact of any tax charge on retirement lump sums, the option to commute part of a pension fund may no longer be exercised by private sector pension scheme members or may be exercised in a manner that reduces the value of the lump sum taken to minimise or avoid any immediate tax charge.