asked the Minister for Finance if he is aware that, where contributions are repaid to a member of a superannuation fund, there is a liability upon the trustees of the fund to pay income tax at a compound rate on the amount of the refunded contributions; and that there are no provisions whereby a member can obtain from the revenue a repayment of the income tax so deducted, even if he is unemployed for a long period following the deduction; and if he is prepared to make arrangements to remedy this position.
Ceisteanna—Questions. Oral Answers. - Income Tax on Superannuation Refunds.
8.
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. In the circumstances, I am not prepared to alter the existing arrangements in these cases.
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 than 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.
Is the Minister not aware, in relation to the CIE pension fund, that they are at present letting off a considerable number of people on branch lines and deducting money from the amount refunded to the contributors? By so doing, they are taking income tax from people with families of seven and eight children, who, since they became disemployed, have been signing on at the labour exchange or getting unemployment benefit. In view of that, will the Minister not reconsider the matter?
They are only carrying out the conditions of the law.
Would the Minister not consider changing the law? Surely he will admit it is unfair, when it is operating against people who are on the breadline, to take the money out of their pockets?
I do not think it is unfair. When employees and employers are making contributions, they are allowed free of income tax.
Did the Minister not admit a few minutes ago that people who would not be liable for income tax because of family commitments are having deductions made from the refund? Surely he can introduce amending legislation to alter that situation because it will get worse if he does not?