Michael McGrath (Cork South Central, Fianna Fail)
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82. To ask the Minister for Finance the estimated cost of reducing exit tax on life assurance policies from 41% to 39%; the estimated cost each year of linking the exit tax to DIRT reductions until they both reach 33%; and if he will make a statement on the matter. [51347/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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In Budget 2017, the then Minister for Finance announced that the rate of DIRT would be reduced by 2 percentage points in each on the subsequent four years so that it would fall by 8 percentage points from its then rate of 41 percent to reach 33 percent in 2020.   

Using the 2017 base, the estimated cost of reducing the rate of LAET from 41 percent to 39 percent is in the order of €11 million. On the assumption that there may be no growth in investment in products liable to LAET over the longer time period and no behavioural change, a reduction from 41 percent to 33 percent could cost in the order of €44 million. If all investment type products which are taxed at a similar rate were also to be reduced from 41 percent to 33 percent, the likely cost including any reduction in the rate applied to LAET could be in the region of €56 million.

The final cost of any possible change is likely to be determined by the change in the level of investment in products subject to LAET. Clearly if the level of investment were to be lower, the cost of a reduction in the rate charged would also be lower, and the reverse is equally true. It is worth noting in that context that to date in 2017 the level of LAET receipts compared to those forecasted is lower by some 23 percent, and this is not expected to change significantly in December.

As I announced during Report State of Finance Bill 2017, in the course of work on this summer’s TSG paper on DIRT and Exit Tax, and following advice from Revenue, it has become evident that there are more complex issues to be addressed in the context of the tax regimes which apply to investment products that are not covered by DIRT, than simply the degree of the rates of tax applied, and that a more holistic approach might be required in the context of addressing opposition calls for study on the re-establishment of the informal link between DIRT and LAET.

I therefore informed that Dáil that I proposes to establish a working group comprising officials from my Department and from Revenue to examine and address the variety and complexity of the existing regimes, including the interaction of those regimes. When announcing this working group, I specified that its work will encompass an examination of the divergence between the rate of DIRT and the rate of LAET, including the impact of that divergence of life assurance savers.

I also noted that the group will consult with the relevant industry bodies, and will carry out a public consultation on the issues within its remit by written submission.

I will instruct the group to present me with coordinated formal proposals in advance of Budget 2019, allowing sufficient time for those proposals to be acted on if necessary.