Brokers Ireland Budget 2019 Submission

Brokers Ireland have made the following 2019 Budget Submission recommendations to the Department of Finance.

To view the the full submission paper, please download Brokers Ireland Budget 2019 Submission here

SUMMARY OF BUDGET RECOMMENDATIONS

• Link exit tax rate to the DIRT rate.

The exit tax and DIRT rates have traditionally been linked , but this link was broken in Budget 2017, with the reduction of the DIRT rate to 39%, with further phased reductions to 33% by 2020. Meanwhile the exit tax rate remains at 41%.

The disparity in the DIRT rate with that from life assurance savings & investment policies and collective investment funds, along with the 1% premium levy, is illogical and distorts the personal investment market by encouraging investment in deposits and certain offshore collective investment funds.

The longer the delay in relinking the DIRT and exit tax rates, the higher the cost becomes. If not relinked shortly, the disparity in rates may become a permanent distortion of the savings and investment market.

• Allow exit tax to be exempted in the same circumstances as DIRT

Permanently incapacitated individuals and those over age 65 can in certain  circumstances be exempted from DIRT through the completion of forms DE1 and DE2. There is no corresponding exemption from exit tax for such individuals.

Exit tax exemption should be allowed in exactly the same circumstances as DIRT exemption.

• Remove the 1% Life Assurance Premium Levy.

The levy was also intended to be ‘temporary’ and distorts the personal investment market given that it does not apply to investments in deposits and collective investment funds.

• Retain marginal rate pension tax relief

Standard rating tax relief on personal pension contributions would penalise the unincorporated self employed who can only make personal contributions, reintroduce a tax on employer contributions to PRSAs, and widen the inequity in the tax treatment of personal and employer (explicit and implicit)  contributions.

• Index the pensions earnings tax relief limit

With earnings and profit growth returning to the economy it is appropriate for the Minister for Finance to recommence indexing the pensions earnings tax relief cap in s790A of €115,000.

We suggest that at a minimum, the pensions earnings limit for tax relief of €115,000 be increased in line with minimum public service salary increases as agreed under the Public Service Stability Agreement (2018-2020)

• Index the Standard Fund Threshold limit

We urge the Minister for Finance to also recommence indexing the Standard Fund Threshold (SFT) limit from 2019 onwards, in line with the minimum public service salary increases provided in the Public Service Stability Agreement (2018-20).

The SFT was always meant to move in line with earnings, and the non-indexation of the SFT is particularly unfair to those in defined contribution (DC) arrangements by favouring those in defined benefit (DB) arrangements, and is encouraging individuals to transfer their retirement funds overseas before their fund reaches the SFT level.

• Allow private sector retirees the same option (s787TA TCA 1997) afforded to the public service to avoid a double taxation of retirement benefits in excess of the Threshold limit.

Retirement benefits taken over the Threshold limit are taxed at an effective marginal rate of close to 70%, when double taxation is allowed for. This is far in excess of the likely income tax relief granted to the contributions which funded the excess.

Those in the private sector who have benefits projected to be over the Threshold limit should be allowed to use the S787TA Taxes Consolidation Act 1997 encashment option in the same manner as public sector employees can, i.e. to encash such benefits subject to one taxation charge prior to retirement.