Disappointment for investors as Donohoe rules out tax cut
FINANCE Minister Paschal Donohoe has confirmed that he will not include any provision in the Finance Bill to cut the exit tax on investments.
Calls for a reduction in the tax, which is 41pc, were made in the run-up to the Budget.
But there was no reduction announced on Budget day despite the deposit interest retention tax (Dirt) coming down.
The exit tax and Dirt tax rates used to move in tandem.
Mr Donohoe confirmed at the Independent News & Media Budget briefing in the Hibernian Club on Dublin’s St Stephen’s Green that he would not include any change to the exit tax in the Finance Bill.
The bill gives effect to the Budget measures and is often used to include additional changes to those announced on Budget day.
Mr Donohoe said he had limited resources so was restricted in what he could deliver.
The exit tax applies on life insurance investments or funds sold by life insurance and investment firms.
Standard Life estimates that around one million people hold these funds. The investment firm’s head of distribution, Jennifer Richards, said she was taken aback at such a definitive ‘no’ from the minister.
“The Government’s job is to improve, not damage, people’s long-term financial well-being,” she said.
“Making it more tax-friendly for people to put their money on deposit where they’re virtually guaranteed to lose money over the long term is not in their best interests,” Ms Richards said.
“The minister and his Government need to understand this is a serious issue for over one million savers.
“Working people and pensioners will be the most affected, the latter being particularly big deposit owners.”
The cost of reducing the exit tax by 2pc is around €14m, Standard Life said. It argued that this was a tiny percentage of the annual tax take.
Having an exit tax that is higher than Dirt doesn’t make sense any which way you look at it. It’s bad for savers, it’s not good for Revenue’s tax take going forward, and it’s far from optimal policy making,” Ms Richards added.
Dirt will go to 37pc next year. The 2pc cut will be repeated in future years until Dirt is brought down to 33pc in 2020.