Dáil Éireann Debate, Wednesday - 24 September 2008
343 Deputy Arthur Morgan asked the Minister for Finance the savings to the Exchequer of reducing the thresholds in respect of pension funds from €5 million to €1 million and the tax-free lump sum limit from €1.25 million to €100,000. [31054/08]
View answerI am informed by the Revenue Commissioners that the basic data is not captured in such a way as to provide dedicated grounds for compiling the estimates requested by the Deputy.
344 Deputy Arthur Morgan asked the Minister for Finance the median income of those who availed of tax breaks in respect of private pension contributions in each of the past five years. [31055/08]
View answerI am informed by the Revenue Commissioners that the most recent relevant information available is in respect of income tax relief allowed for contributions to "retirement annuity contracts" for the five income tax years 2001 to 2005. These are available to the self-employed and to employees not in occupational pension schemes.
The figures of median incomes for each year are set out as follows.
|
Income Tax Year |
Median Income |
|
€ |
|
|
2001 |
31,620 |
|
2002 |
44,809 |
|
2003 |
46,675 |
|
2004 |
50,554 |
|
2005 |
54,459 |
"Median income" is the exact middle income in a numerically ordered range of the individual gross incomes of contributors to "retirement annuity contracts".
It is not possible to provide corresponding figures in regard to the take-up of the tax relief for pension contributions by employers and employees as the relevant data are not captured in such a way as to make this possible.
The information on incomes is based on income returns on Revenue records at the time the data were compiled for analytical purposes, representing about 98% of all returns expected.
A married couple who have elected or have been deemed to have elected for joint assessment are counted as one tax unit.
It should be noted that as PAYE taxpayers were charged to tax on their earnings in the period from 6 April to 31 December 2001 and self-employed taxpayers were assessed to tax for that short "year" on 74% of the profits earned in a 12 month accounting period, the cost figures will not be directly comparable with those of earlier or later years.
345 Deputy Arthur Morgan asked the Minister for Finance the cost of tax relief for private pensions in each of the past ten years; and the average number of people who availed of such tax relief in each of those years. [31056/08]
View answerAs part of the work on the Green Paper on Pensions, a review was carried out into the current regime of tax incentives for supplementary pension provision. This was done with a view to developing more comprehensive and reliable estimates of the cost of reliefs in this area. Arising from the review, the following revised and up to date estimates of the cost of tax and other reliefs for private pension provision for 2006 have been made. Estimates on a consistent basis are not available for earlier years.
|
Estimated Costs |
Numbers* |
|
|
€m |
||
|
Employees’ Contributions to approved Superannuation Schemes |
540 |
680,000 |
|
Employers’ Contributions to approved Superannuation Schemes |
120 |
362,000** |
|
Estimated cost of exemption of employers’ contributions from employee BIK |
510 |
362,000 |
|
Exemption of investment income and gains of approved Superannuation Funds |
1,200 |
Not available |
|
Retirement Annuity Contracts (RACs) |
380 |
2006 data not available |
|
Personal Retirement Savings Accounts (PRSAs) |
120 |
71,500 |
|
Estimated cost of tax relief on “tax-free” lump sums |
130 |
|
|
Estimated cost of PRSI and Health Levy relief on employee and employer contributions |
220 |
Not available |
|
Gross cost of tax relief |
3,220 |
|
|
Estimated tax yield from payment of pension benefits |
320 |
|
|
Net cost of tax relief |
2,900 |
* Numbers as included in P35 returns from employers to Revenue for 2006. Figures are as verified to date but there may be some understatement.
** Numbers of employees for whom employers are contributing to occupational pension funds as included in P35 returns to Revenue for 2006.
As regards projections for 2007 and 2008 projections for income tax receipts are based on assumed movements in macro-economic parameters and not by reference to the costs of individual tax reliefs. Accordingly, I am not in a position to provide the projected cost data requested by the Deputy for the years 2007 and 2008 in relation to the above-mentioned reliefs.
346 Deputy Arthur Morgan asked the Minister for Finance the savings to the Exchequer of applying tax breaks for private pensions at the standard rate only for all taxpayers. [31057/08]
View answerTax relief on individual pension contributions is allowed at the taxpayer's marginal tax rate, that is, at the standard or higher rate as appropriate in each case. It is assumed that the change mentioned by the Deputy is to confine tax relief to the standard rate of 20 per cent, for all pension contributions by individuals, including those currently relieved at the higher rate.
It is not possible to estimate the cost in income tax foregone at the higher rate of relief in respect of employee contributions to occupational pension schemes because the relevant data in relation to contributions is not captured in such a way as to provide a dedicated basis for compiling this information. 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 i.e. the income for tax purposes of employees is net of their pension contributions (the ‘net pay' arrangement).
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 respect of 2005 and subsequent years. The resulting data provides additional information regarding the overall cost of tax relief for pension contributions. However, as the returns are aggregated at employer level, they do not provide a basis for measuring the potential impact on the Exchequer of changes in the rate of relief at individual level such as that mentioned by the Deputy.
As regards the self-employed and certain employees in pensionable employment, data is available in relation to relief on contributions for Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) for the income tax year 2005. On that basis, the full year yield to the Exchequer from confining tax relief to the standard rate of 20 per cent in respect of all contributions to RACs and PRSAs is tentatively estimated at about €175 million in terms of income tax forgone.
347 Deputy Róisín Shortall asked the Minister for Finance further to Parliamentary Question No. 118 of 8 May 2008, if he will provide a similar breakdown by salary levels of tax foregone by the Exchequer in respect of contributions to small self-administered pension plans or schemes for the past three years for which figures are available. [31074/08]
View answerEmployer contributions to small self-administered pension schemes are treated as a trading expense. Employee contributions are netted off as deductions from an individual's income before arriving at the definition of income for tax purposes.
I am informed by the Revenue Commissioners that figures for pension contributions by employers and employees are not captured in such a way as to provide a dedicated basis for compiling a breakdown by salary levels of tax foregone by the Exchequer in respect of contributions to such schemes. Accordingly, I am not in a position to provide the specific information requested by the Deputy.
