There will be shortfall of at least a quarter on
the Labour Party’s promise of a €500 million "wealth tax” package
announced last December in the budget for 2013.
figures released by Minister for Finance Michael Noonan this week
showed cuts in tax relief for private pension funds that would provide
pensions of over €60,000 per annum will yield far less revenue for the
State than anticipated.
In the budget last
December it was estimated the annual saving to the State would be €250
million. But in a reply to parliamentary questions put by Fianna Fáil
finance spokesman Michael McGrath and former Labour minister Roisin
Shortall this week, Mr Noonan disclosed that the yield would be less
that - only €120 million.
Mr McGrath said the disclosure had "blown a
massive hole” in Labour’s "wealth tax”, reducing its overall value from
€500 million to €370 million, a fall of 26 per cent.
was never the case that it could yield that much and the claim has been
dismantled by the release of this information that the State will get
less than half the proceeds it claimed,” he said.
measure was announced in the budget of last December but because of the
complexities in setting up the scheme, its introduction was delayed
The Labour Party made it the central party of a "wealth tax” package which it said would yield half a billion euro to the State.
single measure would yield €250 million, the party claimed. Other
measures included in last year’s package were the increase in Dirt tax
to 33 per cent; increases in Capital Gains Tax and Capital Acquisitions
Tax; extending PRSI to all non-direct income including rents and share
dividend income; and what it described as a "mansion tax” of 0.25 per
cent on homes worth over €1 million.
was announced after Labour Ministers were unsuccessful in their efforts
to get Fine Gael to agree to those earning over €100,000 paying an
additional 3 per cent in the Universal Social Charge. It was received,
politically, as a consolation to the junior Coalition partner to show
measures directed at the wealthiest in society.
and Department of Finance sources said yesterday that other measures
announced in this year’s budget compensated for the shortfall. Measures
that were cited from this month’s budget were the bank levy of €150; the
further increase in Dirt from 33 per cent to 41 per cent, and the
continuation of the pension levy beyond its expiry date.
was also pointed out that there was an inevitable element of estimation
when trying to predict the figures for measures like this, with one
source suggesting the savings to the State could be higher.
Department of Finance adopt a conservative approach. We would hope that
the take-up will be higher than that,” said the source.
Last week, Mr Noonan disclosed disagreements between his department and the pension industry.
At an economic forum last Friday, he said he had fulfilled his side of the bargain, but the pension industry had not.
was taken as a reference to the agreement that the Government would not
reduce tax relief on pension levies from the marginal rate of 41 per
cent to the standard rate of 20 per cent, or an intermediate rate in the
The Government position is that the
pension industry provided figures for the alternative solution that have
not been borne out upon scrutiny. The department said last night that
the issue of reducing tax relief from the marginal rate will not be
This article first appeared in irishtimes.com.