DIRT tax rate cut - with pledge of more to come
Published 12/10/2016 | 02:30
Savers got a small break when the tax on deposits was lowered, with promises of more to come over the next four years.
The deposit interest retention tax (DIRT) rate is one of the highest in the world, at 41pc.
This is higher than the marginal income tax rate of 40pc.
Now the Government has decided to drop the DIRT rate by 2 percentage points each year for the next four years, until it reaches 33pc.
So the rate falls to 39pc from the start of next year.
Finance Minister Michael Noonan said: "In a measure that will benefit savers, I am reducing DIRT by 2pc each year for the next four years. This will reduce DIRT from 41pc this year to 33pc in 2020."
Concern was expressed by Department of Finance officials recently that the tax on savings is now so high that it is failing to work as a revenue-generating measure, Government officials have admitted.
Officials in the Department of Finance stated in a recent paper outlining options for the Budget: "The standard DIRT rate has increased significantly since 2008 (up from 20pc to 41pc) and is now 1pc higher than the higher rate of tax.
"Despite this, yields are falling, which may indicate we have reached a point of diminishing returns."
Diminishing returns refers to a point when the level of profits or benefits gained is less than the amount of money or energy invested.
The latest figures from the Central Bank show that householders had €95.72bn in savings in the banks in August. But savers have been hit by banks continually cutting the interest rate they pay on deposits.