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Tax Code.

Dáil Éireann Debate, Tuesday - 12 April 2005

Tuesday, 12 April 2005

Questions (306, 307, 308)

Joan Burton

Question:

342 Ms Burton asked the Minister for Finance the cost to the Exchequer, in terms of tax forgone, for each year from 1997 to date in respect of approved retirement funds, ARFs, for persons with incomes in excess of €100,000 in bands of €10,000, setting out the numbers of such beneficiaries in each income band and the cost of the tax forgone for each income band. [10111/05]

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Written answers (Question to Minister for Finance)

The Finance Act 1999 made a number of changes to the structure of pension arrangements by introducing additional options for the holders of personal pensions and certain holders of occupational pension schemes. Traditionally the types of benefits available on retirement for such persons comprised a lump sum, a pension for life and an annuity for dependants. Under the new arrangements such a pensioner can on retirement, subject to conditions, use his or her accumulated pension fund to purchase an annuity, have it paid directly to him or herself or have it placed in an approved retirement fund, ARF, or, in certain circumstances, into an approved minimum retirement fund, AMRF.

Funds placed in an ARF, or AMRF, can only come from an individual's approved pension arrangement. Thus, it is not possible to pay funds directly into an ARF. Tax relief is available for contributions made to an approved pension arrangement prior to retirement. Funds placed in an ARF have, therefore, already been tax relieved at the time the contributions to those pension products were made. In the same manner as for pension funds generally, income and gains arising in an ARF are exempt from income tax and capital gains tax so long as they are held within the ARF. Any withdrawals from the ARF are subject to tax at the person's marginal rate of income tax. The same rules apply to AMRFs except that the capital, as distinct from the income, may not be withdrawn from an AMRF until the individual reaches the age of 75.

As there is no requirement in law for qualifying fund managers in relation to ARFs to provide the Revenue Commissioners with details of the amount of funds held in such investment vehicles or of the income and gains arising on such funds, information along the lines requested by the Deputy is not available to the Revenue Commissioners.

Joan Burton

Question:

343 Ms Burton asked the Minister for Finance the cost in terms of tax forgone for each year from 1997 to date in respect of pension fund expenditure by employers on behalf of their employees for people with incomes in excess of €100,000 in bands of €10,000 setting out the number of employees so benefiting in each income band and the cost to the State of the tax forgone for each income band. [10112/05]

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Joan Burton

Question:

344 Ms Burton asked the Minister for Finance the cost in terms of tax forgone for each year from 1997 to date of the provision of the various pension tax reliefs; the beneficiaries of such tax reliefs for persons with income in excess of €100,000 in bands of €10,000 setting out the numbers of employees so benefiting in each income band and the cost to the State of the tax forgone for each income band. [10113/05]

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I propose to take Questions Nos. 343 and 344 together.

It is not possible to provide disaggregated figures in regard to the take-up of the tax relief for all pension contributions across different income categories because the relevant data in regard to contributions is not captured in such a way as to make this possible.

Disaggregated data is only available in respect of the tax relief for contributions to retirement annuity contracts, RACs. RACs are personal pensions used by the self-employed and by employees who are not in pensionable employment. The data are as follows:

Estimated Costs

1997/98

1998/99

1999/2000

2000/01

2001

‘Retirement Annuity Contracts’ available to the self-employed and to employees not in occupational pension schemes

€91.3m

€116.2m

€180.8m

€205m

€170m

Numbers

72,200

92,900

104,500

109,300

109,600

For the short income tax year of 2001 a distribution by income ranges of the claim amounts, amounts of tax relief and average deductions for tax relief for retirement annuity contracts is contained in the following table.

Income Tax 2001 (short "year")

Retirement Annuity — by range of Gross Income

Range of Gross Income

Totals

From

To

Number of cases

Amount of deduction

Reduction in tax

Average deduction

6,000

1,258

1,301,889

76,588

1,035

6,000

8,000

1,217

1,131,858

159,747

930

8,000

10,000

1,976

2,066,245

318,130

1,046

10,000

12,000

2,779

3,131,978

538,747

1,127

12,000

15,000

5,489

6,725,589

1,228,558

1,225

15,000

17,000

4,446

5,613,493

1,067,199

1,263

17,000

20,000

7,513

10,476,115

2,039,761

1,394

20,000

25,000

12,222

19,723,266

4,505,791

1,614

25,000

27,000

4,567

8,276,351

2,214,991

1,812

27,000

30,000

6,350

12,331,704

3,457,396

1,942

30,000

35,000

9,441

20,838,925

6,506,746

2,207

35,000

40,000

7,942

20,490,572

7,354,258

2,580

40,000

50,000

11,427

37,038,299

14,847,501

3,241

50,000

60,000

6,807

29,985,541

12,417,840

4,405

60,000

75,000

5,741

35,653,618

14,883,125

6,210

75,000

100,000

4,543

41,479,867

17,310,850

9,131

100,000

150,000

3,951

56,115,725

23,514,956

14,203

150,000

200,000

1,753

38,561,305

16,149,432

21,997

over

200,000

2,635

98,693,919

41,399,977

37,455

Totals

102,057

449,636,259

169,991,594

4,406

On the other hand, with regard to occupational pensions, that is, schemes set up by the employer, the figures in respect of employee and employer contributions are particularly tentative and are available only in aggregate form.

Tax relief for pension contributions by employees is normally given by way of a deduction from total income in arriving at income for tax purposes, that is, the income for tax purposes of employees is net of their pension contributions, the "net pay" arrangement. The employer's contributions are an allowable deduction from profits and are not specifically recorded in Revenue statistics. However, provisions were included in Finance Act 2004 with a view to improving data quality and transparency without overburdening taxpayers-employers. The Act includes provisions that require employers to provide data on superannuation contributions in the P35 form to be filed by employers in February 2006. The following table outlines the very tentative figures currently available to the Revenue Commissioners.

Income Tax Relief relating to Pension Contributions

Estimated Cost

Income Tax Relief

1997/98

1998/99

1999/2000

2000/01

2001

Contributions by employers*

€436m

€533m

€595m

€646m

€498m

Contributions by employees*

€257m

€329m

€421m

€472m

€389m

Numbers of employees contributing to approved superannuation schemes**

not available

not available

569,220

629,800

670,500

Exemption of Net Income of Approved Superannuation Funds (Contributions Plus Investment Income Less Outgoings)*

€823m

€967m

€1,226m

€1,292m

€938m

* These are tentative estimates.

** Calendar year figures sourced from annual reports of the Pensions Board 2001 was a "short" tax year from April to December. The latest data available is for years up to 2001. PRSAs were not introduced until 2002.

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