Tuesday, 25 June 2013

Questions (224)

Pearse Doherty

Question:

224. Deputy Pearse Doherty asked the Minister for Finance the logic behind exempting savings bonds from DIRT and the revenue that could be raised for the Exchequer if DIRT was applied to the bonds, both at the current rate and at a new increased rate of an additional 2%. [30647/13]

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Written answers (Question to Finance)

Interest on Savings Bonds is applied on maturity, which is after three years, or on encashment, which could be at any stage during the life of the Savings Bond. A higher rate of Deposit Interest Retention Tax (DIRT) applies when interest is paid less frequently than annually, as is the case with Savings Bonds, and since 1 January 2013 this rate is 36%. The standard DIRT rate of 33% applies to interest paid annually or more frequently than annually.

Based on the interest payout on Savings Bonds in 2012 of €138.3 million, if this had been subject to the higher DIRT rate, which was then 33%, it would have yielded c. €45.6 million.

Based on projected estimates for the full year interest payout on Savings Bonds for 2013 of c. €178m, if DIRT were to be applied at the current higher rate of 36% for payments made less frequently than annually, the estimated yield would be c. €58.7m. If this rate was increased by 2%, based on projections, this could yield €67.6m.

The foregoing estimates assume no significant behavioural change by investors in Savings Bonds.

State Savings products such as Savings Bonds provide a convenient and State assured method of saving for members of the public. The funds invested provide the State with a low cost form of borrowing. To encourage participation by savers in order to ensure this funding remains available, the interest on Savings Bonds, Savings Certificates, National Instalment Savings and the payment on maturity for the National Solidarity Bond are and have traditionally been tax free. I have no plans to change the tax free status of Savings Bonds or the other State Savings products.