Tax on thrift is a case of Joe and Mary bearing the brunt
Published 11/10/2015 | 02:30
Savers deserve a break from this Government. The amount of tax imposed on the interest earned from putting money aside is nothing short of scandalous.
And don't for a minute be fooled into thinking it is some sort of tax on wealth. It is nothing of the sort. Instead, it is a tax on thrift and another example of feckless elites lumping the cost of the banking collapse on the shoulders of ordinary Joes and Marys.
The tax on savings has doubled during the austerity years, with almost half of any return earned from a bank or credit union savings account going back to the Exchequer.
It coincides with savers seeing the returns they get on their money collapse, as banks have repeatedly cut savings rates to fatten up their profit margins.
Oh, it is only the lucky wealth few who have savings in the banks, you might think.
Not a bit of it.
The high taxes and the low returns are hitting ordinary families saving money for their children to attend college, and older people putting money aside for the unexpected and for future care needs.
In what is one of the strangest pairings in a long time, both the Consumers Association and the Banking and Payments Federation are calling for the tax to be cut in this week's Budget.
Banks argue that their deposit base is critical to avoid having to raise money from wholesale money markets, something that was said to have contributed to the banking crash.
Interest earned on savings is taxed at 41pc. This DIRT (deposit interest retention tax) rate has shot up from 20pc back in 2008, just as the financial downturn hit.
And some PAYE workers now have to join the self-employed and pay 4pc PRSI (pay related social insurance) on the interest earned on deposit accounts, if they are under the age of 66 and have unearned income of more than €3,174.
This means that 45pc of any interest earned on savings is taken in tax.
The best interest rate on a one-year savings account has dropped from 3.5pc in 2010, to just 1.15pc at the moment, according to calculations by price comparison site Bonkers.ie.
In 2010, €10,000 on deposit returned €262.50 after DIRT tax. This year the €10,000 amount yields just €67.85, once DIRT tax is deducted.
This means Irish people are earning 74pc less on their savings than five years ago.
That amounts to punishment for the prudent.
Shame on the Government for treating savers so shabbily.
Sunday Indo Business