Dáil Éireann díospóireacht -
Tuesday, 3 Mar 1998

Vol. 488 No. 1

Written Answers - Deposit Interest Retention Tax.

Trevor Sargent

Ceist:

166 Mr. Sargent asked the Minister for Finance his views on whether children under 16 years of age should be exempt from the deposit interest retention tax on post office accounts in order to encourage the habit of saving to a reasonable amount; and the measures, if any, he has to alter the arrangements in this regard. [5630/98]

Minister for Finance (Mr. McCreevy)

Where the DIRT regime applies, there are no exemptions from DIRT for individuals resident in the State. A review was previously carried out by the Revenue Commissioners to see if it was possible to introduce some form of exemption in certain cases that arose. However, no practicable solution was found. The difficulties mainly arise from the arrangements that would be necesary to police an exemption system. However, under certain circumstances DIRT may be refunded i.e. people aged 65 years or over (or people whose spouses are over 65 years of age), and individuals who are unable to look after themselves due to permanent ill health. Refunds apply to the extent that the individuals would not otherwise be liable to tax on the interest income.

At the time of the introduction of the DIRT system, consideration was given to a more general refund system. However, a number of significant problems were identified at that time. Among these was the very real possibility of tax evasion. The more effective countering of tax evasion was one of the primary reasons for the introduction of DIRT in the first instance. This could arise if an account was opened in the name of an individual with no liability to income tax (e.g. a child) for the purposes of evading DIRT. In addition, operating a general refund system would lead to several administrative problems not to mention the significant costs involved, given the significant numbers of potential cases which would need to be assessed in any one financial year. It should be borne in mind that DIRT raises a significant amount of tax, £150 million in 1997. If any general exemption scheme were to be introduced, the yield would be greatly reduced and this would have obvious consequences for Government policy. The potential for abuse of a general refund system as well as the costs that would have to be incurred to operate such a system are still valid reasons for not extending the refund provisions allowed for in the DIRT legislation. Consequently, I have no plans, at present, to extend these refund arrangements to other categories, such as children.