Wednesday 21 February 2018

The attack on savers

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan

THE tax on savings will have doubled in the space of five years when the new rate comes into effect next January.

Before the economy blew up in 2008, the DIRT (deposit interest retention tax) on interest earned from a savings account was 20pc.

By January it will have gone up to 41pc, from 33pc at present. This is a rise of 105pc in five years.

Back before the boom, it was possible to get interest rates of 5pc and 6pc on one-year deposit accounts.

The latest information from the Central Bank is that interest rates paid by banks were cut for the 16th consecutive month in August. New deposits left with the bank for at least six months are paying on average just 0.8pc, the Central Bank said.

Despite the drop in savings rates and the rise in DIRT tax in successive Budgets, there is still €91.5bn in household savings in banks, with another €10.46bn in the State's 400 credit unions.

The new 41pc rate will also become the exit tax on investment funds and life assurance policies, Finance Minister Michael Noonan said in the Budget this week. He said he had increased the tax to stop people hoarding money.

PRSI will also apply from January on savings for employees with non-PAYE income of €3,174.

The combination of a new DIRT rate and the imposition of PRSI will mean that almost half of any interest earned from savings will now end up being handed over to the Revenue.

Irish Independent

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