The Government is looking at the introduction of a new incentive scheme to direct some of the €170 billion held on deposit in banks and financial institutions into investment.
The proposed initiative is still being worked out in detail, but some Coalition sources suggested it could involve savers being given options of putting some money into an account to be invested in potentially different products with varying degrees of risk in return for tax breaks.
Minister for Finance Simon Harris said on Sunday it was an absolute priority for him in the two budgets he would deliver in this role “to see how we can incentivise savings and investment”.
However, Government sources said the initiative under consideration was not a special savings incentive account (SSIA) scheme similar to that put in place 25 years ago by former Fianna Fáil minister for finance Charlie McCreevy. Under that scheme, participants received a 25 per cent government top-up on their investment.
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Harris told RTE’s This Week programme on Sunday that he would publish a framework document for his proposed incentive scheme in the coming weeks.
He said the area was complex and would have to look at tax issues and the amount that participants could put into an account, potentially tax-free.
Harris said there were similar schemes in place in Canada and Sweden. He suggested that his proposed framework could look at “the idea that you might be able to put into an account a certain amount and not pay tax”.
He indicated that it could also look at “the idea that you might actually be able to have a lower rate tax or how to deal with issues like deemed disposal as it’s called. There’s a whole variety of issues here.”
Deemed disposal is a 38 per cent “exit tax” that applies to investments in Irish-domiciled investment funds and life assurance products, as well as equivalent offshore funds and certain foreign life assurance products.
Under the deemed-disposal rules, tax is levied eight years after an investment is made, and every subsequent eight years, regardless of whether or not the investment is sold for cash. The tax is levied on any gain in the value of the investment from the date of acquisition to the date of the deemed disposal. When it is sold, any tax paid is allowed as a credit against the final tax liability.
“I’m very conscious I will deliver two budgets in my role as finance minister. I want to make progress in both budgets on this issue. The next step is to bring a strategy and a framework to Government in the coming weeks and then to engage and discuss with stakeholders. But there’s a huge opportunity here to help build up economic resilience, not just in the country, but actually in families as well.”
The Minister said he wanted to tackle an inequality that existed in this area at present.
“The only people who can actually make a bit of money on their investments are the uber wealthy. Now, I want the middle classes to have an opportunity here ... This is about making their money work for them,” he said.
