Dirt tax 41%

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MrEarl said:
Hello,

My feeling is that this increased tax is designed to help push down the net return on cash savings, to help encourage spending or debt reduction ....
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Debt reduction is now the interesting thing. With interest rates so low and the Government taking nearly half of interest earned, for those with mortgages, it is almost a no-brainer to now overpay the mortgage from savings or make lump-sum contributions.

The difference between mortgage rates and net savings rates is now quite disproportionate...
 
How this has passed everyone, including the media, by, I don't know.
This is to divert money out of the banks and into state savings, so the state, instead of paying out 3.68% to international bondholders, just pays 1.32% to its own citizens. Here's how it works in govt interest costs saved vs DIRT foregone;

1000 NOT borrowed on bond market@3.68% 36.8 Saving to Govt
1000 on NTMA 3yr bond@1.32% 13.2 Cost to Govt
DIRT lost on 1000@3%int, 45% DIRT 13.5 Cost to Govt
Net saving to Govt 10.1 MINIMUM Net saving to Govt for every 1000 switched from bank deposits to state deposits.

If a billion switches from avg 2% bank deposits to state savings, the Govt saves 14.6M euro on the bond markets.

Once again the Govt which says its trying to promote growth and restore a functioning banking system is in fact sucking resources, in the form of tax and credit, away from the productive sector to spend on the huge money-addicted state.
 
Chancer said:
How this has passed everyone, including the media, by, I don't know.
This is to divert money out of the banks and into state savings, so the state, instead of paying out 3.68% to international bondholders, just pays 1.32% to its own citizens. Here's how it works in govt interest costs saved vs DIRT foregone;

1000 NOT borrowed on bond market@3.68% 36.8 Saving to Govt
1000 on NTMA 3yr bond@1.32% 13.2 Cost to Govt
DIRT lost on 1000@3%int, 45% DIRT 13.5 Cost to Govt
Net saving to Govt 10.1 MINIMUM Net saving to Govt for every 1000 switched from bank deposits to state deposits.

If a billion switches from avg 2% bank deposits to state savings, the Govt saves 14.6M euro on the bond markets.

Once again the Govt which says its trying to promote growth and restore a functioning banking system is in fact sucking resources, in the form of tax and credit, away from the productive sector to spend on the huge money-addicted state.
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interest rates on state savings are likely to be cut again very soon, banks have already started complaining. Each previous time they complained, interest rates were reduced.
There appears to be a government policy of forcing people to stop saving.
 
Fair point Sebadoh, but wait & see.
There will be an adjustment, but my betting's that it won't 100% compensate for the DIRT change.
It reflects the ambivalence Govt has to the whole banking sector now; Resolve Mortgage crisis but not TOO quickly cos we're not ready to recapitalise you, start lending money to business, but keep buying Govt bonds hand over fist. We want a good deposit base but we want people to spend more.
However, in the balance, the overweening necessity to keep the money coming into the exchequer always holds sway.
IF Govt savings rates are reduced, yes it will mean less money will switch from banks to NTMA, but all the money that gets rolled back into NTMA (a huge proportion I'm sure) will now be rolled over at a lower interest rate. The Govt can name its domestic savings rate by hobbling its competitors with a DIRT hike. I still think this is MAINLY an exchequer funding ruse, not a genuine attempt to force savers to spend on a serious scale.
If they genuinely wanted to force savers to spend, they'd have lowered the NTMA rates in the budget BEFORE being asked to do so by the banks, and lowered them by enough to give themselves a funding headache.
My advice is; close your bank a/c now, and get the interest at today's DIRT, and put it into NTMA savings as quick as possible. ie lend your money to the Govt before they take it!
 
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If the aim of the Government (Troika) is to increase spending, then people may simply switch from DIRT liable bank savings to DIRT free state savings. This may have the opposite effect if savings are locked away for 3/5/10 years in the state offerings.
 
Just on another point, I have an Irish Life policy ,exit tax is now 36%,What will it be in new year?


Pat
 
a lot of people fail to realise that savings rates in irish banks are much higher than in other countries , for instance in the usa right now , savings rates are at most 1% , much of Europe the same

in effect , despite the huge increase in dirt tax , savers have little option in other places
 
west_bound said:
a lot of people fail to realise that savings rates in irish banks are much higher than in other countries , for instance in the usa right now , savings rates are at most 1% , much of Europe the same
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Yeah, this is a point missed by a lot of people.

USD rates are typically around 0.25%, they have gone up recently but you will struggle to get a rate over 1.10%.
JPY rates are close to zero.
GBP rates have nose dived in last year, you are lucky to get 2%.
CHF rates are close to zero.

EUR rates in Ireland are still above the Eurozone average, and EUR rates as a whole are often well above the deposit rates paid by most other major currencies.
 
In the UK, you are looking at 2% for some of the best buy Cash ISA's. A cash ISA will allow savings of £5,760 per tax year, increasing with inflation, with all interest within the ISA tax-free.

To net that in an Irish account, you'd now be needing an interest rate of about 3.64%.

You can also get some current accounts with very good interest rates - Santander and Nationwide spring to mind.
 
Just going to continue to put a few euros a week into my spread betting account, my "special savings " vehicle. ;)
 
If you had an insurance policy (endowment policy) for cashing in next year would you be better to do it before end of Dec.
 
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