Tax Yield

Dáil Éireann Debate, Thursday - 18 July 2013

Thursday, 18 July 2013

Ceisteanna (157)

Michael McGrath

Ceist:

157. Deputy Michael McGrath 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%; and tax relief is reduced to 20%; and if he will make a statement on the matter. [36641/13]

Freagraí scríofa

Minister for Finance

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. These estimates take no account of any behavioural impacts which may arise from the proposed changes and which could effect the scale of any yield under the various scenarios outlined.

Exchequer Yield

Reduction in Relief Allowable at specified Marginal Tax Rates

Reduced Earnings Cap (below €115,000)	-	-	-	-
€	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