Pearse Doherty (Donegal, Sinn Fein)
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159. To ask the Minister for Finance further to Parliamentary Question No. 8 of 10 April 2024, if he has received correspondence from the Revenue Commissioners expressing concern regarding the BIK exemption for employer contributions to PRSAs, legislated through Section 22 of the Finance Act 2022, if he will share details of those concerns expressed; and the actions he is considering on foot of those concerns. [23484/24]

Michael McGrath (Cork South Central, Fianna Fail)
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By way of background, prior to 31 December 2022, where the combined contributions by an employer and an employee to a PRSA did not exceed the employee’s annual percentage limit (between 15% and 40% of “net relevant earnings”, varying depending on age, up to a maximum relieved salary of €115,000), the contributions were relieved from tax. However, where the combined contributions exceeded the threshold, the amount above the threshold was treated as a taxable benefit in kind (BiK) in the hands of employee. The employer was entitled to a deduction for tax purposes for the PRSA contribution.

Finance Act 2022 removed the BiK charge on employer contributions and stopped aggregating employer PRSA contributions when calculating the employee’s age and salary related contribution limit. This was to give effect to a recommendation of the Interdepartmental Pensions Reform and Taxation Group (IDPRTG) report that the difference in treatment between PRSA contributions and contributions to an occupational scheme should be abolished. These recommendations were made with a view to improving and simplifying the pension landscape in Ireland and it was expected that such changes would likely result in a change in behaviour, encouraging increased PRSA contributions.

I am advised by Revenue that since the implementation of these changes, Revenue has been actively monitoring trends and data in relation to employer contributions to PRSAs and occupational pension schemes as part of Revenue’s ongoing work to monitor and review compliance across all matters related to the taxation of pensions. This analysis has highlighted a number of cases, which are currently being examined. This matter was discussed recently by the Chairman of the Revenue Commissioners at the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach. During the discussion, the Chairman outlined his concerns relating to some practices that have been identified.

Officials from Revenue informed officials in my Department that this analysis was underway and merited further examination. I am informed by Revenue that it expects to submit a paper to my Department in the coming weeks that will outline the detailed findings in relation to how the provisions are operating and the specific concerns in relation to same.

The process of ensuring that taxation relief is availed of in an appropriate manner is ongoing and continuous, and involves Revenue and my Department working closely together to monitor developments, assess data and, where necessary, amend provisions to avoid misuse.