Léim ar aghaidh chuig an bpríomhábhar

Deposit Interest Rates

Dáil Éireann Debate, Thursday - 20 October 2016

Thursday, 20 October 2016

Ceisteanna (84)

Peter Fitzpatrick


84. Deputy Peter Fitzpatrick asked the Minister for Finance the reason the exit tax has not been reduced in line with the reduction of 2% on DIRT as announced in budget 2017; and if he will make a statement on the matter. [31267/16]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Deposit Interest Retention Tax (DIRT) is deducted by Irish financial institutions from deposit interest paid to the accounts of Irish residents. The basic rate at present is 41%.

DIRT is a "final liability tax" that is, it satisfies the individual's full liability to Income Tax in respect of deposit interest.  The individual may still be liable to PRSI on the interest.  Deposit interest subject to DIRT is not subject to the Universal Social Charge. 

As you are aware, in my Budget speech last week, I announced that the rate of DIRT will be cut by two percentage points for each of the next four years, so that it will have been reduced to 33% by 2020.

It is estimated that the overall cost of each 2% reduction in the rate of DIRT is some €9 million in a full year, so that by the time the full reduction is in effect in 2020, the annual full year cost is estimated to be approximately €36 million.

I am aware that in the past the rates payable on a series of other taxes, including Exit Tax, have tended to move in line with DIRT, however on this occasion I took a decision that those other rates would not be reduced.  I decided on this change for the following reasons.

The cost of reducing the rates of the other taxes  (where the rates payable have tended to move in line with the rate of DIRT) by two percentage points was tentatively estimated by the Revenue Commissioners to be (allowing for rounding) about €14 million per annum, or (allowing for rounding) about €56 million per annum by 2020 the period over which DIRT is to be reduced. It was therefore too costly to the Exchequer to reduce the rates applying to these taxes in the same manner as the reduction in DIRT.  

When the rate of DIRT was originally increased, it was aimed at revenue raising and at encouraging consumer spending to boost economic activity. As consumer expenditure has now increased significantly it is now possible to reduce DIRT rates to encourage saving and improve the return to the small saver.  I am conscious of the impact of DIRT rates on the small saver who invests in retail savings products and where there has been a long period of low interest rates and consequently a low rate of return on such products. 

In common with all taxes, Exit Tax is subject to ongoing review, and in this process the rate of tax as well as all reliefs and exemptions are carefully considered.