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 ....
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.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.
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
Just on another point, I have an Irish Life policy ,exit tax is now 36%,What will it be in new year?
Pat
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