Dáil Éireann Debate, Wednesday - 17 September 2014
288. Deputy Terence Flanagan asked the Minister for Finance his views on matters regarding the pension levy on private sector pensions (details supplied); and if he will make a statement on the matter. [34282/14]
View answerI announced in my Budget 2014 speech that the 0.6% Pension Fund Levy introduced to fund the Jobs Initiative in 2011 will be abolished from the 31st of December 2014. I have, however, introduced an additional levy on pension funds at 0.15% for 2014 and 2015. I am doing this to, among other things, continue to help fund the Jobs Initiative.
The reduced VAT rate of 9% on tourism and certain other services was one of the very significant and successful measures introduced by the Jobs Initiative. It was due to end in 2013. In my Budget 2014 speech I announced the continuation of the reduced 9% VAT rate. I also announced that the Air Travel Tax is being reduced to zero with effect from 1 April 2014. The 9% VAT rate has helped to create thousands of new jobs as well as protecting existing jobs. Since the Budget announcement about the reduction in the Air Travel Tax, airlines have announced the opening up of new routes resulting in significant increases in passenger numbers with the associated increase in tourism activity and employment.
The additional 0.15% levy for 2014 and 2015 will also be used to help make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties although funds from the levy will not be hypothecated or specifically set aside for this purpose. The Government has decided that such liabilities will be met by the Exchequer as they arise.
While the pension fund levy does not apply to unfunded public service pension schemes, the pensions of public servants, including those of Government Ministers and TDs, have been subject to a public service pension reduction (PSPR) since 1 January 2011. The PSPR was introduced on 1 January 2011 under the Financial Emergency Measures in the Public Interest Act 2010. The PSPR is not a levy, but is a pension cut affecting public service pensions. At the time of its introduction, the PSPR was designed to cut all public service pensions above €12,000 in payment or awarded up to the end of a "grace period", which ultimately expired at the end of February 2012. The PSPR did not originally apply to any pensions of post-grace period retirees, on the basis that their pension awards had otherwise been reduced by being based on actual reduced pay rates reflective of the 2010 pay cuts, not "pre-cut" pay rates as applied to retirees during the grace period. On introduction, the PSPR was estimated as reducing public service pensions by 4% on average, with more severe effects experienced at higher pension levels due to the progressive multi-band structure of the reduction.
A change to the PSPR was made on 1 January 2012, when a 20% reduction rate (previously 12%) was imposed on pension amounts above €100,000. With effect from 1 July 2013, more changes were made to the PSPR to deliver on the Government's commitment to further reducing those public service pensions above €32,500 by between 2% and 5% in certain circumstances, including the pensions above that level of individuals who retired after end- February 2012.
As the Deputy will appreciate, it is very difficult to determine the precise number of jobs that have been created in the economy as result of the Jobs Initiative. However, I would point out that the most up to date data, the Quarterly National Household Survey - Quarter 2, 2014, indicates that an additional 40,300 individuals are employed in the economy when compared to same period in 2011. Furthermore, an additional 23,300 individuals are employed in the tourism and hospitality sectors, which were the sectors that specifically benefit from the reduction in the VAT rate from 13.5% to 9%. Similarly, it is not possible to determine the precise net benefit to the Exchequer as a result of the additional jobs created since the reduction in the VAT rate.
I am informed by the Revenue Commissioners that receipts to date from the 0.6% Stamp Duty levy on pension fund assets, introduced in the Finance (No. 2) Act 2011, are €463 million in 2011, €483 million in 2012 and €535 million in 2013.
The position is that all of the money raised from the stamp duty levy has been used to fund the wide range of measures introduced in the Jobs Initiative to protect existing jobs and create new jobs. These include expenditure measures such as the JobBridge and the Springboard schemes, as well as a number of tax and PRSI incentives such as the reduction in the VAT rate from 13.5% to 9% for the tourism and hospitality sectors and the halving of the lower employer PRSI rate.
I am conscious of the significant contribution of taxpayers, generally, to the rebalancing of the public finances and the measures introduced to support and develop the economy. There has been progress in these areas. These efforts are ongoing, including the continuation of measures in the Jobs Initiative, designed to improve the economic environment by providing the means to encourage job creation in areas of our economy most likely to deliver that employment in the shortest timeframe possible.
Preparations for Budget 2015 and the consequent Finance Bill are ongoing. It would not be appropriate for me to comment on what changes, if any, are being considered to the pension fund levy or any other tax measure.
