Ireland Proposes To Tax Pensions

Tyler Durden's picture

Ireland just floated another proposal that is sure to be another big hit with the general population:

The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.

It will apply for a period of 4 years commencing this year and is intended to raise about €470 million in each of those years. The levy will not apply to pension funds established here and providing services and benefits solely to non-resident employers and members. Further details regarding the proposed application of the levy are set out in the Summary of Initiative Measures.

I am conscious of the concerns of the pensions industry about the impact of a levy in circumstances where the pensions sector, in common with other sectors in our economy and society, is finding the current economic and financial environment very challenging. However, the imposition of the levy is for a relatively short period and its purpose is to improve that environment by providing the means to encourage job creation in areas of our economy most likely to deliver that employment quickly.

The levy is being confined to pension funds because I believe that the alternatives for increases in taxation elsewhere at this time would be more damaging to the economy. I will be glad to consult with the pensions industry on the legislative provisions which will give effect to the levy so as to seek to minimise, where possible, any unnecessary difficulties which this measure may give rise to.

The pension levy represents a very significant contribution by the pensions industry and the many individual savers it represents to our commitment to getting the economy moving again. I am aware that the pensions sector is also concerned, given the temporary levy, about the commitment in our agreement with the EU/IMF to reduce the tax relief on pension contributions starting next year. I will examine this issue in the context of the results of the Comprehensive Review of Expenditure currently being undertaken by the Minister for Public Expenditure and Reform, and any resulting scope for fiscally neutral changes to the EU/IMF agreement.

While the debate of how much €470 million a year will bring to the economy at the expense of pensioners, as well as just how "relatively short term" this development will be is one thing, this latest scramble to raise funding (in lieu of Ireland's stubborn refusal to hike corporate tax rates... for now), is likely a precursor to what may and likely will happen to other "austere regimes" both in Europe, and soon in the US. We can just see it: soon enough pension funds will become demonized as being the sole beneficiaries of monetary largesse, and as a result will be forced to do their Robin Hood duty of funding various federal, state and local government empty coffers in a comparable taxation method. Ultimately, it presents the Chairman with yet one more reason to inflate risk assets as high as possible, before this "capital raising" process becomes a reality not only in Dublin, but in D.C. as well.

As for the alternative, the proposal of a financial transaction tax.... crickets.

h/t John