Brokers Ireland Appeal To Finance Minister For Fair Treatment Of SaversBACK TO ALL NEWS
19th Sep 2017
Brokers Ireland has today supported a call for the Minister for Finance Paschal Donohoe to reinstate the link between DIRT tax on savings and Exit tax on life assurance based savings in the forthcoming budget, on the basis that last year’s decision to reduce DIRT from 41pc to 33pc by 2020 while leaving Exit tax at 41pc means the State is prioritising short term savings vehicles over those that give better returns to the consumer over the longer term.
Diarmuid Kelly, CEO of Brokers Ireland which represents 1,300 firms said: “We fully support Standard Life’s call to reverse the unfair exit tax legislation which is directly penalising small to medium savers. The disparity between DIRT and Exit tax rates directly dis-incentivises consumers from making wise and long term personal investment decisions.”
He said savings products generally subject to DIRT as opposed to Exit tax have yielded little or no growth for several years. “If interest rates are at zero, inflation will erode the actual sum saved by the amount of the annual inflation rate. In this it has a similar effect to that of the pension levy.”
Mr Kelly said responsible savers/investors who plan for the longer term should not incur disproportionate tax rates for making sound financial choices. “And good legislation should not steer people towards short-term savings vehicles solely because of preferential tax treatment. The tax regime should be neutral so that savers can invest appropriate to their short and long term needs.”
He said savings/investment funds sold by life companies, those that are subject to Exit tax, tend to be far better diversified and less risky than many of the products that are subject to DIRT tax.
“The link should be retained on the basis that it facilitates consumers in terms of choice, diversification and optimum outcomes, principles that underpin sound financial planning.”
Mr Kelly said there may be a perception that those who invest their savings in life assurance products are better off and can, therefore, better afford the higher Exit tax. “In fact, the majority are small to medium range savers. Wealthier investors tend to involve themselves in direct equities, shares and property. Ironically such are subject to the lower Capital Gains Tax at 33pc, while Exit tax is payable at 41pc.
“We strongly urge Minister Donohue to re-link the exit tax rate on saving to the DIRT rate from 2018’, he said.
Brokers Ireland are also asking broker members to lobby their local TD representatives on this important and pressing issue.