Sunday 22 October 2017

Dirt falls, but no change in the exit rate

Savings

Picture posed: Thinkstock
Picture posed: Thinkstock
Charlie Weston

Charlie Weston

A CUT in the tax on interest earned on savings was delivered as promised in the Budget.

Finance Minister Paschal Donohoe wants to encourage savers.

The tax had been as high as 41pc at one stage as the Government sought during the austerity years to encourage savers to spend.

Known as deposit interest retention tax (Dirt), last year it came down to 39pc.

Next year it will go to 37pc.

The 2pc cut will be repeated in future years until Dirt is brought down to 33pc in 2020.

But those with savings in investment funds did not get any break from Budget 2018.

This has led to claims that some 600,000 savers are "unfairly" taxed.

The Dirt tax and exit taxes used to be linked, as they rose and fell at the same rate, at the same time.

But there has been no reduction in the exit tax on life insurance investments or funds sold by life insurance and investment firms.

Investment firm Standard Life has said the failure to reduce the exit tax rate means 600,000 savers are losing out.

"Standard Life has written to the Finance Minister Paschal Donohoe urging him to reverse last year's unfair legislation, which penalises mostly small to medium-sized savers diligently trying to secure a better life for themselves and their families, without being a burden on the State," said Jennifer Richards, head of distribution at the investment company.

Reductions in the Dirt rate should be matched by similar cuts in the exit tax rate, she said.

The life company argued that deposit interest rates are so low that savers with money in a bank are almost guaranteed to lose money.

Irish Independent

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