Pearse Doherty (Donegal South West, Sinn Fein)
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170. To ask the Minister for Finance the expected loss of revenue due to the cut in the imputed distribution rate to 4% in the Finance Bill 2014. [44048/14]

Michael Noonan (Limerick City, Fine Gael)
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I assume the Deputy is referring to the annual rate of imputed distribution applying to Approved Retirement Funds (ARFs) and vested PRSAs which is being reduced next year from 5% to 4% of the value of the assets in the ARF/vested PRSA where the value is €2 million or less and the owner is not aged 70 years or over for the whole of a tax year. Where the owner is aged 70 or over for the whole of a tax year the rate continues at 5%. The existing 6% rate also continues in all cases where the value of the ARF/vested PRSA is greater than €2 million.

I am informed by the Revenue Commissioners that information provided to them in the context of the tax paid on these deemed or imputed distributions does not include information on the value of the ARFs and/or vested PRSAs out of which the distributions are deemed to arise or on the age profile of the beneficial owners of these funds.  Moreover, details of tax paid on actual withdrawals from ARFs or vested PRSAs are not separately collated. There is therefore no basis on which a reliable estimate of the impact on the Exchequer of the change mentioned in the question could be compiled.

The deemed or imputed distribution measure which was introduced in Budget and Finance Act 2006 is designed to encourage draw downs from ARFs and vested PRSAs so that they are used, as intended, to fund a stream of income in retirement in the same way as a retirement annuity, for which ARFs and vested PRSAs are supposed to operate as a more flexible alternative. The measure, in itself, is not intended to nor does it give rise to significant tax revenues as it does not apply to actual draw-downs from ARFs and vested PRSAs which are taxed in the normal way. By way of indication, the amounts received by the Revenue Commissioners from tax paid on imputed distributions has averaged about €4 million per annum in the period 2007 to 2013.

I should also say, however, that to the extent that the change in the imputed distribution rate to 4% will result in reduced actual draw downs  by affected ARF or vested PRSA owners, that any consequent reduction in tax revenue from this source will be offset to some extent by the increased tax revenue from the beneficial owners of Approved Minimum Retirement Funds (AMRFs) who can avail from next year of the option (also introduced in Finance Bill 2014) to access up to 4% of the value of assets in those funds, subject to tax at the marginal rate.