Pearse Doherty (Donegal, Sinn Fein)
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46. To ask the Minister for Finance further to Parliamentary Questions Nos. 64 to 66 of 9 April 2025, if he was presented evidence by the Revenue Commissioners that the amendment introduced into the PRSA pension schemes in the Finance Act 2022 was being used in a manner not in keeping with the policy intention; the estimated scale in value terms and in number of people involved; and if he will make a statement on the matter. [21474/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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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.

As the Deputy is aware, Section 22 Finance Act 2022 removed the difference in treatment between PRSAs and occupational pension schemes. The amendment abolished the Benefit in Kind (BIK) charge on employer contributions to an employee’s PRSA. In addition, employer contributions to an employee’s PRSA no longer counted towards an employee’s age and salary related percentage limits on tax deductible contributions. The change in approach for PRSAs was recommended by the Interdepartmental Pension Reform and Taxation Group (IDPRTG) with a view to improving and simplifying the pension landscape in Ireland.

As with the introduction of any new provision, Revenue monitors trends and conducts analysis based on actual data to ensure the measure is operating as intended. I can confirm that Revenue submitted a paper to my Department outlining its findings and concerns regarding how the provisions were operating, on the basis of data relating to employer contributions to PRSAs in 2023 submitted in the payroll returns for that year.

The Revenue statistics supplied to my Department identified categories of cases that gave rise to concerns. Revenue data shows that in these cases, the employer contributions to PRSAs were significantly higher than the salary associated with the employment and, in many of these cases, the recipient of the contribution had a connection to the employer (for example, owner or spouse, child, parent of the employer).

For reasons of taxpayer confidentiality, I am unable to share all the data provided by Revenue. However, I can state that Revenue’s analysis of employer PRSA contributions included in the payroll returns for 2023 indicated that there were 125 employments in 2023 where the employer PRSA contribution exceeded €100,000, and in 99 of these cases Revenue established that the employee had a connection with the employer (for example, owner or spouse, child, parent of the employer). Whereas the 125 cases in 2023 represent 0.3% of the total number of employments with employer PRSA contributions in that year, the contributions paid in respect of these cases represents 20% of the overall amount of employer PRSA contributions in the same period.

To illustrate the nature of the behaviour and structures put in place by individuals and businesses, Revenue provided real life anonymised examples to further demonstrate how these changes were not in line with the policy intention. I am cognisant of the obligation to protect taxpayer confidentiality under section 851A Taxes Consolidation Act 1997 and I am therefore not in a position to share these specific examples provided to my Department by Revenue.

My officials in the Department engaged with Revenue following the submission of their analysis and I introduced an employer limit in Finance Act 2024 to address the concerns raised.

Pearse Doherty (Donegal, Sinn Fein)
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47. To ask the Minister for Finance further to Parliamentary Question Nos. 64 to 66 of 9 April 2025, to provide further detail on the reason General Anti-Avoidance Regulations can not be used to recoup unpaid tax if people rearranged their affairs for the sole purpose of gaining a tax benefit given that tax avoidance is defined as transactions which are undertaken primarily to claim a tax advantage and not for genuine business reasons; and if he will make a statement on the matter. [21492/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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As outlined in response to Questions Nos. 64, 65 and 66 on 9 April last, section 22 Finance Act 2022 amended the provisions for employer PRSA contributions. As with any change in tax policy, Revenue monitored developments after the introduction of these provisions. From Revenue’s analysis of employer PRSA contributions in 2023, it appeared some cases displayed behaviour that was not in keeping with the policy intention of the changes. Section 12 Finance Act 2024 aimed to address these concerns by imposing a limit on the size of employer contributions to a PRSA that are not considered a BIK. I am informed by Revenue that there is a continuous focus on compliance across pensions, which involves identifying and confronting non-compliant behaviour.

I am advised by Revenue that the taxpayer confidentiality provisions in section 851A Taxes Consolidation Act 1997 (TCA) prohibits it from commenting further on the application of the General Anti-Avoidance Rule (the “GAAR”) in these specific instances.

However, Revenue has advised that, in general terms, tax avoidance is applying tax legislation in a way that inappropriately obtains a tax advantage. Tax avoidance can involve the misuse of tax reliefs and allowances or the re-characterisation of a transaction. It involves transactions which are undertaken primarily to claim a tax advantage and not for genuine business reasons.

In relation to the question of the application of what is sometimes referred to as the general anti-avoidance rule (GAAR), at a high level, the GAAR disallows a tax advantage which has arisen as a result of a tax avoidance transaction. It does this by providing that regard should be had to the substance of the transaction, rather than just its legal form. This means that, for example, where artificial steps are put into a transaction with the intent of reducing the tax arising, those artificial steps are ignored. It is designed to counteract transactions which have little or no commercial reality and are carried out primarily to create an artificial tax benefit.

The GAAR is provided for in section 811C TCA and operates by providing that a taxpayer is not entitled to a tax advantage arising out of a tax avoidance transaction. In addition, if Revenue believes that a taxpayer has participated in a tax avoidance transaction, there is no time limit on when Revenue can carry out enquiries as to whether or not the transaction is tax avoidance, withdraw the tax advantage by amending an assessment and collect or recover any amount of tax.

The question as to whether a tax advantage has arisen out of a tax avoidance transaction is a matter of fact, based on the specific circumstances of a case.