Life firms say investment exit tax should be cut in line with Dirt

Scottish investment group Standard Life and a host of other professional bodies are calling on Minister for Finance Michael Noonan to level the playing field for investment products and cut exit tax in line with the reduction in deposit interest retention tax (Dirt) on savings.

In last month’s budget, Mr Noonan announced a cut in the Dirt rate on deposits from 41 per cent to 39 per cent, with further 2 per cent to be cut annually to bring the rate to 33 per cent by 2020. However, he signalled no change to the exit tax on investment products, such as those sold by life assurance companies, which is still levied at a rate of 41 per cent.

It means tax on investment funds is now the highest, with gains on deposits facing tax of 39 per cent, and gains on individual shares liable to capital gains tax at a rate of 33 per cent. Dirt rates and exit tax have been levied at the same rate since 2002.

“The Minister and his Government cannot want to unfairly penalise people prudently saving for a home, their children’s education, a rainy day or other life necessities,” said Jennifer Richards, head of Standard Life Ireland. “Especially when it’s their stated policy to ‘encourage saving and improve the return to the small saver’.”

Standard Life, Insurance Ireland, the Professional Insurance Brokers Association and the Irish Association of Investment Managers want a matching reduction in exit tax to bring it to 33 per cent also by 2020.

“This would avoid penalising mostly small to medium-sized savers who diligently try to secure a better life for themselves and their families without being a burden on the State,” Ms Richards said.

The group is also calling for the 1 per cent levy, introduced on life assurance investment policies dating from 2009, to be abolished “immediately”, calling it an “outdated penal tax” that discriminates unfairly against prudent long-term savers.