Author: The Irish Times
Minister of Finance Michael Noonan,
in delivering his budget statement, also sought to disarm the mainly
international critics of Ireland’s corporate tax regime by publishing a
charter clearly outlining the Government’s tax strategy. It includes a
commitment to an Ireland that "plays fair” and always acts with integrity in the conduct of its international tax policy.
Noonan might now consider issuing a national tax charter, an equally
solemn declaration that might reassure his domestic audience, many of
whom are struggling to understand some tax decisions made in this and
Department of Finance secretary John Moran
last week outlined the view of Government that restructuring the
"hugely flawed” Irish tax system was central both to sustaining growth
and raising revenue. And savers and investors, as one category of
taxpayers, will certainly second that.
For savers, the rise in Dirt tax to 45 per
cent – including PRSI – means that from January 1, they will retain just
over half the interest earned on their cash deposits. Interest rates
are at record lows, and with higher inflation forecast – 1 per cent next
year and 2 per cent in 2015 – depositors will receive negative real
returns. Tax and inflation will combine to erode the real value of their
By using what has come to be called
"financial repression”, the Government is penalising savings. In doing
so, it aims to raise more revenue from savers by the higher tax which is
also designed to discourage saving and to encourage spending. The tax
rate on savings has more than doubled in five years.
4 per cent PRSI levy on the unearned income of those under 66, while
paid into the social insurance fund, will not provide any extra benefit.
The pension levy on private sector pension funds, due to end next year,
is set to continue, at a higher rate in its current form, and at lower
rate thereafter. Clearly, a national tax charter is urgently needed.
This article first appeared in irishtimes.com.