asked the Minister for Finance if he will introduce amending legislation to eliminate the present unjust practice whereby income tax is deducted from lump sum refunds of superannuation contributions previously paid by workers from wages which were not liable to tax deduction.
Ceisteanna—Questions. Oral Answers. - Income Tax Deductions from Refunds of Superannuation Contributions.
23.
Presumably the Deputy has in mind contributions to a superannuation fund approved by the Revenue Commissioners under Section 32 of the Finance Act, 1921.
Where such contributions are refunded to an employee, the law requires payment of income tax at one-third of the standard rate on the amount refunded. The underlying principle is that the Revenue should be compensated for relief allowed on the contributions when they were made. The rate taken, one-third of the standard rate, represents roughly the composite rate at which relief for employees' contributions to the fund is given. In the case of any particular fund some employees will have enjoyed relief from income tax at the standard rate; others will have received no effective relief in that they would not have been liable for any tax even if their contributions had not been allowed as deductions.
I might emphasise that the liability to income tax at one-third of the standard rate on the amount refunded is imposed on the trustees of the fund and not on the employee. The law adopts the only course which would be administratively practicable by looking at the fund as an entity rather that at the individual members of the scheme. In some cases the rules of the fund require the trustees to recoup the tax by reducing the amount which would otherwise be payable to the employee.
I take it the Minister would not even consider—or would he consider—introducing amending legislation to do away with this system of deducting income tax from lump sums arising out of superannuation contributions?
No.
The Minister has given me the reason. I am asking him if he is prepared to consider amending legislation.
These contributions are free of income tax when being contributed.
And the Minister believes that that position should obtain?
It means there is no question of the contributions coming back again free of income tax. If they get superannuation, it is subject to income tax.