Chopra afraid of backlash over pension levy plans
Government assured IMF team payment would be temporary
Published 21/05/2011 | 05:00
The IMF's team in Ireland baulked at the Government's plan to fund a jobs initiative through a levy on private pension funds, fearing a public backlash.
In its review, the IMF notes that Ajai Chopra, Martin Muhleisen and their team had "reservations" about the quality of this measure, including "potential behavioural responses". But the Government eased their concerns by stressing the temporary nature of the measure. The Irish authorities "consider that the temporary nature of the levy mitigates these concerns" according to the IMF review.
The Government levy on pension funds is expected to raise €1.8bn to fund the jobs initiative between 2011 and 2014 and to fully cover its cost. Looking ahead though, the IMF is encouraging the Government to "actively review" the effectiveness of all aspects of its jobs initiative and to adapt policies to deal with any budgetary difficulties or any potential distortion that may arise in the economy as a result of it.
The levy has met with fierce opposition, and pension trustees are to meet Finance Minister Michael Noonan to demand that the Government abandons this plan.
The Government, though, appears resolute, and a second Finance Bill -- to pave the way for the tax of 0.6pc on the value of private pension fund assets -- was published this week. It also provides for the imposition of fines on trustees or administrators who fail to pay the levy. They will face fines of €380 for every day they are late with the payment.
The bill also allows trustees or administrators to reduce the pensions being paid out to retired people, which is the first time this has been introduced in Irish law.
The levy will be calculated based on the value of the fund in May 2011 and half of the 0.6pc is due to be paid to the Government by July 25 next.
There has been anger that the Government hasn't imposed the levy on approved retirement funds (ARFs) used by wealthy individuals, such as former Irish Nationwide boss Michael Fingleton, for their pensions.