# DIRT Tax



## tipperjoe (25 Nov 2011)

Hi
Was wondering does anyone think the government will raise tax on deposits in the upcoming budget? I havent heard it mentioned anywhere, but I think it maybe a possibility, just for the fact that it appears to me to be an easy target.

Joe


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## mcriot29 (25 Nov 2011)

Looks very like dirt will be 30percent on jan the 1st .


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## STEINER (25 Nov 2011)

I think DIRT will be increased as it is quite low hanging fruit, even up to 33.33% wouldn't be too bad from this saver's viewpoint.


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## askU (25 Nov 2011)

STEINER said:


> .... even up to 33.33% wouldn't be too bad from this saver's viewpoint.


Are you for real to make a statement like this! 27% is awful.


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## callybags (25 Nov 2011)

askU said:


> Are you for real to make a statement like this! 27% is awful.


 
It's a lot better than 41% for top rate taxpayers if it was to be taxed as normal income.


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## Swyper (25 Nov 2011)

askU said:


> Are you for real to make a statement like this! 27% is awful.



You've got to be kidding. Work is taxed at 41%. There is no reason that DIRT should not be the same. In the UK, you pay tax on your interest at your marginal rate of income tax. It should be the same here.

Anyway, we are over-saving right now.


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## WindUp (25 Nov 2011)

& remember --- the money being saved has probably already been taxed at the hifgher rate when you earned it so

you earn 100k
Tax at 41% = 41,000
you save 59000 and earn interest of 1600 & pay further DIRT at 27% = 0.4k

you take out 60.2k and maybe buy stuff which has vat @ 21% on it = VAT of 10.5K

thats a lot of tax on the 100k you earned -


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## mcriot29 (25 Nov 2011)

33percent is far too much if that happens people with large amounts will take funds out of irish banks 
Most have payed tax on the money they have in savings to go above 30 percent is crazy


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## DB74 (25 Nov 2011)

WindUp said:


> & remember --- the money being saved has probably already been taxed at the hifgher rate when you earned it so
> 
> you earn 100k
> Tax at 41% = 41,000
> ...



You have earned €101,600, not €100K

DIRT should be at the top rate IMO

As for taking the money out of the country, people will still be liable for tax at the top rate irrespective of where the money is kept


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## mandelbrot (25 Nov 2011)

mcriot29 said:


> 33percent is far too much if that happens people with large amounts will take funds out of irish banks
> Most have payed tax on the money they have in savings to go above 30 percent is crazy


 
In which case the interest earned becomes liable to income tax at the marginal rate... so to avoid paying DIRT at 30%-ish, you volunteer to pay tax at 41%. Very patriotic! 

Why shouldn't people with large amounts of money on deposit contribute?


Edit: SNAP! DB74


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## wbbs (25 Nov 2011)

What if you have no other income other than the interest and the capital it comes from, then I think you should only have to pay the basic rate of tax on it, the capital was taxed at 41% originally.


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## Aureus (26 Nov 2011)

We need to pick a taxation policy designed to match the circumstances in which we find ourselves. In the midst of a deep recession with high unemployment we need to boost consumer demand as much as possible. That means minimising taxation on consumption and hiking taxes on savings and investments. This and the previous government seem determined to do the opposite. They are going to further raise VAT but have done little to raise DIRT or touch the generous regime for pensions.

We should be taxing DIRT at each saver's top marginal rate (52% for many people) like they do in the UK. We should also increase taxes on investments and dividends. (I think the top rate is 52% if you include employee PRSI and the USC)

We should suspend all tax relief on pension contributions; encouraging people to save rather than spend is a laudable goal usually but in our current dire circumstances it is pro-cyclic and terrible policy. This is low hanging fruit that would generate a good amount of revenue.

As a temporary policy, we should also allow people to access their pension funds straight away, especially if they are unemployed or in debt trouble. Allowing someone to become destitute while they have thousands in a pension pot is not sensible or good for the wider economy.



> if that happens people with large amounts will take funds out of irish banks


I don't think so. As I understand it if you are resident in the state or a citizen then the government can tax your worldwide income if it chooses to.



> that's a lot of tax on the 100k you earned


Yes taxes are a lot higher than you might think once you factor in income tax, DIRT, VAT, inheritance tax, etc. You might also include employer's PRSI of 10.75%, which in effect is a hidden income tax.

But the unfortunate reality is that revenue has to increase in the next budget. I want a taxation policy that will be counter-cyclical and minimise further loss of jobs. But if we are going to talk about abstract notions of fairness then it is better to raise taxes on those with €100k of savings than to increase VAT: a regressive tax that hits low earners the hardest.


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## Marc (26 Nov 2011)

Aureus makes some very good arguments to which I would add

What if the capital was originally inherited?

Gifts or inheritances received in the first decade of this century were tax free up to the threshold and prior to 2008 were only taxed at 20%.

So it is wrong to imply that just because some people paid 41% tax on some of their income that a higher rate of tax on savings is unfair.

I would argue that a flat rate of DIRT is regressive from a taxation perspective and a marginal rate combined with either exemptions or tax credits is much fairer for everyone.

Rental income is also "unearned" income so why do we tax this at marginal rates but savings at a flat rate?

issues like these can make savers and investors make bad overall investment decisions for "tax reasons"


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## camlin90 (26 Nov 2011)

Marc said:


> I would argue that a flat rate of DIRT is regressive from a taxation perspective and a marginal rate combined with either exemptions or tax credits is much fairer for everyone.


Trying to force PAYE taxpayers to complete tax returns purely so they can declare their deposit interest. Good luck with that!

It would encourage a flood of people into State Savings though, which would be good for government financing (while destroying the banks). 
The UK has tax-free ISAs which help to keep some funds in the banks.



Aureus said:


> We should suspend all tax relief on pension contributions; encouraging  people to save rather than spend is a laudable goal usually but in our  current dire circumstances it is pro-cyclic and terrible policy. This is  low hanging fruit that would generate a good amount of revenue.


When we already have a huge hole in pension funds and people can expect to live at least 20 years in retirement? Pension contributions are a habit that need to be encouraged; suspending them for a few years will have long term consequences. Doing this might be a reasonable sticking plaster now, but when you're stacking shelves in Tesco on the night of your 75th birthday you might think differently.


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## kdoc (26 Nov 2011)

[QUOTE Why shouldn't people with large amounts of money on deposit contribute?[/QUOTE]

They already contribute at 27%. In many cases people are are saving for their retirements as they cannot depend on the State to look after them in their old age. They didn't drink, snort or gamble their money, but instead chose to save it as a utility for the future - that is looking bleaker by the minute.


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## Aureus (27 Nov 2011)

> Pension contributions are a habit that need to be encouraged; suspending them for a few years will have long term consequences


I take your point. But I'm not saying that we should stop anybody contributing if they chose to do so. It's just that at the present time we shouldn't be using public funds to top-up pensions, when the effect is deflationary and the money is badly needed elsewhere. At the very least we should cap tax relief at the standard rate (c20%).

I agree that the pension issue is a serious long term problem that will have to be dealt with. Personally, once the country is back on it's feet I would favour a generous tax regime for savers and possibly even making pension contributions mandatory. But not in the midst of the Great Recession. No one can afford to contribute to a pension, or avoid stacking shelves at 75, unless they actually have a job to go to each morning right now.


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## Aureus (27 Nov 2011)

> They already contribute at 27%.


Everybody contributes to the tax system one way or another and every new tax creates some sort of "unfairness". The question is who can most afford to pay and what will be the effect on the economy.


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