Finian McGrath (Dublin North Central, Independent)
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76. To ask the Minister for Finance if he will examine a proposal (details supplied) on tax relief; and if he will make a statement on the matter. [42014/15]

Michael Noonan (Limerick City, Fine Gael)
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The State encourages individuals to save for their retirement by providing incentives through the tax system for them to invest some of their earned income into pension saving arrangements approved by the Revenue Commissioners. The incentives include exemption from income tax on pension contributions made from annual relevant earnings based on a percentage of those earnings which increases with age and subject to an overall earnings limit of €115,000 per annum. Pension fund growth is also exempt from tax while the retirement benefits drawn down at retirement are subject to tax at the individual's marginal tax rate with the exception of the permissible tax-free retirement lump sum.

Revenue approval of the various pension saving arrangements ensures that the tax incentives outlined above are confined to pension schemes and plans that are taken out for the sole purpose of providing retirement benefits at the appropriate age in line with tax law and Revenue rules.

As regards personal pensions plans such as Retirement Annuity Contracts or PRSAs, an individual must have a source of "relevant earnings" in order to effect such a plan. In general, this covers income taxable under Schedule E from non-pensionable employment and trading and professional income (Schedule D, Cases 1 and 2). Income from investments such as rental income from property, cannot be used to effect such a plan as it is not a source of "relevant earnings". This reflects the fact that pension income replaces an individual's earned income once they retire. In contrast, individuals with investment income do not lose that income source at the point at which they reach what could be considered "normal retirement age". The income will continue as before and they have the investment asset, for example, a property or properties, which may be converted to a capital sum with which they can purchase an annuity if they so wish.

Having excluded investment income from "relevant earnings" for the purposes of private or supplementary pension provision and the tax reliefs on contributions that go with it, it would appear contradictory, to say the least, from a policy perspective to then allow tax relief at a later date on rental income from a property designated a "pension property" by the property owner which appears to be what is envisaged in the details supplied with the question.

Where an individual owns a property and rents it out, the rental income is receivable directly by the landlord and accordingly is taxable in the year that it is receivable. There are a number of allowances and deductions available to reduce the tax on rental income paid. These include, for example: a deduction of 75% of the interest paid on borrowed money used to purchase, improve or repair rented premises; the cost to the landlord of any goods provided or services rendered to a tenant; and the cost of maintenance, repairs, insurance and management of the property.

However, for the reasons outlined, I have no plans to introduce further changes or additional tax incentives as requested.