Dáil Éireann Debate, Tuesday - 6 November 2012
203. Deputy Pearse Doherty asked the Minister for Finance the amount that could be raised for the Exchequer if the imputed distribution percentage on approved retirement funds and PRSAs was increased from 6% to 8% where the asset values are in excess of €2 million and from 5% to 7% where the asset values are between €1 million and €2 million. [47348/12]
View answerAn annual imputed distribution rate of 5% applies to approved retirement funds, ARFs, with asset values of €2 million or less and, from this tax year, to ‘vested’ personal retirement savings accounts, PRSAs, where benefits have commenced) on the same basis. A higher imputed distribution rate of 6% applies from this tax year to ARFs and/or ‘vested’ PRSAs with asset values of more than €2 million. I assume the Deputy is suggesting an increase in the imputed distribution from 6% to 8% for ARFs and/or ‘vested’ PRSAs of more than €2 million in value and an increase from 5% to 7% where the asset values are greater than €1 million and less than €2 million. I am informed by the Revenue Commissioners that information provided to them in the context of the tax paid on these deemed or imputed distributions does not include information on the value of the ARFs and/or ‘vested’ PRSAs out of which the distributions are deemed to arise. There is therefore no basis on which a definitive estimate of the impact on the Exchequer of the change mentioned in the question could be compiled.
As an exercise that might provide some indication of the scale of the additional tax yield involved, data made available to my Department from private sector sources provides a breakdown of ARFs by value in respect of a number of providers representing an estimated 40% of the ARF market. There is no similar data available in relation to ‘vested’ PRSAs.
Out of a total value of some €2.4 billion in ARFs under management by these providers where the average ARF value was just over €127,000, the total value of those ARFs representing individual funds of over €1 million and under €2 million was €274 million. The total value of those ARFs representing individual funds of over €2m was €137 million. Based on a very rough extrapolation of these figures to arrive at a broad potential estimate for the total value of ARFs with assets in excess of €1 million, the estimated additional tax yield from applying increased imputed distribution rates to such ARFs as set out above would be about €8 million in a full year.
It is important to note that the deemed or imputed distribution measure is designed to encourage draw downs from ARFs and ‘vested’ PRSAs so that they are used, as intended, to fund a stream of income in retirement in the same way as a retirement annuity, for which ARFs are supposed to operate as a more flexible alternative. The measure, in itself, does not give rise to significant tax revenues as it does not apply to actual draw-downs from ARFs and ‘vested’ PRSAs, which are taxed in the normal way. Moreover, increasing the annual percentage notional distribution for ARFs and ‘vested’ PRSAs as suggested in the question would further increase the risk that the retirement income derived by the owners from such funds could be depleted before death.
