Most Irish consumers believe the difference in tax treatment of investment returns compared with interest on deposit accounts is unfair, according to an Aviva Life and Pensions Ireland survey.
“The differential tax treatment between those investing and savers with money on deposit has long been a bone of contention in our industry as we are not competing on a level playing field and it is stymying investment funds,” Aviva chief executive Barry Cudmore said.
“It is also grossly unfair to customers investing who currently pay 41 per cent exit tax on gains [in investment funds] as opposed to 33 per cent deposit interest retention tax (Dirt) on deposit savers,” he said. “In addition, investors also pay a 1 per cent government levy on their initial investment,” he said.
Aviva’s survey of 1,000 consumers found 68 per cent of respondents found the disparity unfair with a higher percentage from households with children (72 per cent), single women (71 per cent) and couples (70 per cent), but only 58 per cent of single men.
Those who claimed that the tax treatment on investment returns was unfair was highest among those aged 55-65 (74 per cent) followed by 35-44 year olds (67 per cent) and 45-54 year olds (66 per cent), it found.
“The Minister for Finance Michael McGrath announced plans to review the 41 per cent exit tax on life funds last February, acknowledging the industry’s view that the tax is encouraging the high rates of money kept on deposit while stymying investment funds,” Mr Cudmore said.
“Both the pillar banks have raised their full-year net interest income forecasts, driven by rising rates and the 4 per cent overnight interest they are getting from the ECB [European Central Bank], while many of their deposit customers are receiving little or no return for their savings,” he said.
“We are now calling on the Minister for Finance to accelerate his review of this unfair tax burden on investors so that we are all operating in a level playing field in the interests of all,” he said.