Thursday, 8 November 2012

Questions (118, 119)

Seán Fleming

Question:

118. Deputy Sean Fleming asked the Minister for Finance the revenue that would be raised from reducing the annual earnings limit along with age-related percentage limits for maximum tax relievable contributions for pension purposes from €115,000 to €100,000, €90,000, €80,000, €70,000 and €60,000 respectively; and if he will make a statement on the matter. [49283/12]

View answer

Seán Fleming

Question:

119. Deputy Sean Fleming asked the Minister for Finance if he will set out in tabular form the revenue that would be raised from reducing the annual earnings limit along with age-related percentage limits for maximum tax relievable contributions for pension purposes from €115,000 to €100,000, €90,000, €80,000, €70,000 and €60,000 respectively if tax relief is granted at the marginal rate; the maximum rate of tax relief is reduced to 34%; the maximum rate of tax relief is reduced to 30%; the maximum rate of tax relief is reduced to 30%; the tax relief is reduced to 20%; and if he will make a statement on the matter. [49284/12]

View answer

Written answers (Question to Finance)

I propose to take Questions Nos. 118 and 119 together.

I assume that the Deputy is referring to the current annual earnings cap of €115,000 which operates to limit the level of tax-relieved personal pension contributions in any one year. The annual earnings cap acts, in conjunction with age-related percentage limits of annual earnings, to put a ceiling on the annual amount of tax relief an individual taxpayer can obtain on pension contributions. A breakdown of the cost of tax relief on employee contributions to occupational pension schemes is not available by income tax rate, as tax returns by employers to the Revenue Commissioners of employee contributions to such schemes are aggregated at employer level. An historical breakdown is available by tax rate of the tax relief claimed on contributions to personal pension plans — Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) — by the self-employed and others, to the extent that the contributions have been included in the personal tax returns of those taxpayers. There is, therefore, only a limited statistical basis for providing definitive figures.

However, by making certain assumptions about the available information, the Revenue Commissioners inform me that the estimated full year yield to the Exchequer from reducing the current annual earnings cap of €115,000 to the thresholds outlined in the question, and at the various specified marginal tax rates, in respect of individual contributions to occupational pension schemes, RACs and PRSAs would be as shown in the following table.

Exchequer Yield

Exchequer Yield

Reduced Earnings Cap

(below €115,000)

Reduction in Relief Allowable at specified

Marginal Tax Rates

Current Rate

34%

30%

20%

€100,000

€35m

€155m

€244m

€490m

€90,000

€65m

€165m

€274m

€510m

€80,000

€95m

€210m

€300m

€535m

€70,000

€130m

€240m

€329m

€555m

€60,000

€175m

€265m

€354m

€580m