The rate of tax on Special Savings Accounts has been raised to 20 per cent, from 15 per cent, with effect from April 6th, 1998, yielding $6 million to the Exchequer in 1998 and £7.5 million in a full year.
"We are aiming for 20 per cent standard rate of income tax and it makes sense to move the rate of DIRT on special savings accounts to this rate now," the Minister for Finance said.
Mr McCreevy said it would also help correct the imbalance between the tax treatment of deposit interest and other income - but, he said, the new rate would still provide a competitive after-tax return to Irish depositors on their investments.
Income tax and capital gains tax on special investments accounts, which are required to invest over half of their funds in Irish equities, will continue to be at 10 per cent.
there was mixed reaction to the decision to raise the rate of tax on SSAs. The Irish Association of Investment Managers welcomed the recognition of risk investment in the decision to maintain a 10 per cent tax rate for special investment accounts, while increasing the rate at which SSAs are taxed. But bankers, while acknowledging that it was inevitable that SSAs were going to incur a higher rate of taxation eventually, said it was a pity the Minister did not wait.
"I am surprised he did it in one jump instead of over a couple of years," TSB chief executive, Mr Harry Lorton said.
ICC bank economist, Ms Mary Doyle pointed out that, with interest rates so low many depositors were already looking for saving alternatives which would yield a higher return.