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Taxing Pensions to Create Jobs?
Joe Brennan and Dara Doyle of Bloomberg report, Ireland to Impose Levy on Pension Funds to Finance Jobs Plan:
Ireland’s
government will impose a temporary levy on domestic private pension
savings to fund a jobs plan aimed at cutting unemployment and aiding the
economic recovery.
The government
plans to apply an annual 0.6 percent charge over four years on pension
assets, excluding funds providing benefits to non-resident employers and
members, Finance Minister Michael Noonan said in Dublin today. The move
should generate 470 million euros ($675 million) a year, he said.
The
sales-tax rate on tourism-related products and services will be cut to 9
percent from 13.5 percent, while a travel tax may also be suspended,
subject to conditions, he said. The government will also introduce a
partial loan guarantee program for small and medium-sized businesses.
“There
is no escaping the fact that we do not have the resources available at
present to fund large-scale policy initiatives to help to generate
economic activity,” said Noonan. Still, “I believe that today’s jobs
initiative will help rebuild confidence amongst households and firms at
home and among potential investors abroad.”
With
unemployment close to a 17-year high, Ireland’s new government is
seeking to create jobs within spending restrictions set down in the
country’s bailout from the European Union and International Monetary
Fund. Prime Minister Enda Kenny has pledged that the measures will have a
neutral impact on the budget set out in December.
Ireland
cut its 2011 economic growth forecast to 0.75 percent from 1.75 percent
on April 29, citing weaker-than- expected domestic demand. The
country’s unemployment rate was 14.6 percent in April.
Moody’s
Investors Service warned yesterday its current Baa3 stance on Ireland,
the company’s lowest investment-grade rating, could face “downward
pressure” if the ability to restart debt sales is hampered by “adverse
sovereign developments in other euro-area peripheral countries.”
The
country was forced into an 85 billion-euro international rescue in
November as it sought to solve Europe’s worst banking crisis. It has
been struggling to convince investors its debt is sustainable after the
collapse of a domestic real-estate bubble in 2007.
You can read details of Minister Noonan's Jobs Initiative by clicking here (HT: John). On the pension levy, here is what is proposed:
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.
Reaction to the pension levy proposal is mixed. The Irish Times reports, Hysterical response to proposals by pensions industry, says Noonan:
The
pensions industry has been accused by Minister for Finance Michael
Noonan of reacting in a “quasi-hysterical” manner to the 0.6 per cent
levy imposed in the Jobs Initiative.
At a news conference in
Government Buildings last night, he said the Government was “pulling
back a very small proportion” of the tax relief enjoyed by the industry
over the years.
Accompanied by
Minister for Public Expenditure and Reform Brendan Howlin, Mr Noonan
said the levy did not have to come from pension funds and the industry
could choose to absorb it instead.
“The
reaction has been quasi-hysterical by the pension industry,” he said
and pointed out that in recent years pension funds had not been invested
in the Irish market.
Mr Howlin said public sector employees were
already paying a pension levy and the new levy was being imposed “on
money that has been put away without paying tax”. The new levy was
intended to help in “restarting our economy” and such a development
would be good for pension funds.
Mr
Noonan said fees charged in Ireland by the industry were
“substantially” larger than in the UK and there was scope for
reductions. “I’m disappointed by the outcry from some in the pension
industry because it is totally exaggerated,” Mr Noonan said.
He
said the Government was trying to make the tourism industry more
competitive as part of its Jobs Initiative. “You remember the time when
you had to take out a mortgage to take your friends out for a meal,”
he said.
Mr Noonan said the Jobs Initiative was “not a package of bits and pieces, it is a very carefully thought-out package”.
At
an earlier press conference outlining the plan, Taoiseach Enda Kenny
and Tánaiste Eamon Gilmore said the Government was looking to specific
sectors such as tourism to generate employment.
The Government had
inherited an enormous fiscal and economic challenge, Mr Kenny said,
and it was meeting that challenge “head-on”. There were 440,000 people
unemployed: that was why the Government had “acted so swiftly”; that
was why the Government had “hit the ground running” and was announcing
the Jobs Initiative after 10 weeks in office.
The Government was forecasting “a net additional 100,000 jobs by 2015” and it would like to go beyond that target if possible.
“The
12.5 per cent corporation tax remains unnegotiable, we have said that
now repeatedly and that is the position,” Mr Kenny said.
Mr
Gilmore said: “The whole focus of this Government’s activity and our
work is to bring about economic recovery and to get people back to
work.”
He added: “We committed in the programme for government
that, in our first 100 days, we would introduce a Jobs Initiative. That
has been delivered upon today.”
The Labour leader described the
announcement as “a significant set of proposals amounting to €1.8
billion over a four-year period”.
The initiative was also “focused” on particular sectors where people could be got into work in the short term.
“One of those is tourism,” he said and the Government was conscious that the 2011 tourism season was just starting.
There would be a “huge focus” on Ireland, arising from the visits by Queen Elizabeth and US president Barack Obama.
“Therefore
we have decided to concentrate the reduction in the VAT rate on
tourist-related activity in order to generate reduced costs and generate
some tourist activity,” Mr Gilmore said.
Responding to Fianna
Fáil’s claim that the pension levy was “a smash-and-grab raid on the
savings of ordinary people”, Mr Kenny said: “The pensions referred to
here were built up with massive tax reliefs over the years and most of
them are involved in overseas assets.
“What’s involved here is bringing back a very small percentage of this, at 0.6 per cent.”
Asked
if the proposal that some of the funding for the initiative is to come
from reallocations within departments would affect the prospect of
savings from the Croke Park deal being returned to lower-paid public
sector workers, Mr Kenny said this was not precluded.
Asked what
would be the actual number of new jobs created under this initiative, Mr
Kenny said: “It’s impossible to put a figure on the extent of jobs
that can be created through a resurgence of confidence.”
I
fear that this Jobs Initiative is going to be a major flop. First,
taxing pensions is political suicide. In order to avoid increasing
corporate taxes, they're going after pensions. Second, even if it's for
a short period, how many jobs can Ireland's tourism industry create to
make a material difference on historically high unemployment? Finally,
once you open this Pandora's box of partially nationalizing pensions,
then the temptation will be there to continue with these policies in the
future. Not sure Ireland wants to go down this slippery slope.
»
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bye bye 401K nice tax deferred while it lasted--- another trap
The only answer is dont save in anything but precious metals.Leo and his cohorts can't steal what they dont have.
Maybe - but they did confiscate all gold once already and what would stop them from doing it again?
And, they , not just Leo, have plans for your 401K also.........
http://www.infowars.com/government-to-confiscate-401ks-and-iras-for-mand...
Actual compliance on the gold confiscation orders during the Depression was MINIMAL. They only raised 500 tons from safety deposit box raids (with the IRS standing there as you opened it) and some people that donated.
The compliance rate for gold / silver confiscation in this country would be abyssmal.
The other side of that coin, if they are there to steal your PM's they are there for your life (as in stealing your life savings). Act accordingly.
I will give you another idea:
Tax all wages at the unemployment rate. Unemployment goes up, taxes go up. Unemployment goes down taxes go down.
That should be the U-6 rate, and that tax should pay for all emplolyee and employer contributions to social security and medicare. The tax should also be on tax free compensation such as healthcare benefits, options and 401K.
I have a better idea. Taxes on congress critters, presidents and all members of the executive and judicial branches increase in proportion to the federal deficit. If the government runs a surplus, they all get a big bonus.
I have a better idea. Taxes on congress critters, presidents and all members of the executive and judicial branches increase in proportion to the federal deficit.
This makes perfect sense.
I would say they should tax the pensions another 1% to help fund my trip to Ireland this Summer. I expect free beer and a Leprechaun sighting (one of those little old pensioners can dress up and run about for me).
I also want dinner with Mr. Noonan so we can laugh about the quasi-hysterical reactions of pensioners over their 30+ years of hard labor and savings and government promises being stolen to make political fudge and cotton-candy; and to pit the young against the old for personal political and monetary gain.
Imagine, the Irish pensioner not understanding how vital taxing their pensions are to their own future and not being willing to suffer with less caviar and single malt like Mr. Noonan!?!? Preposterous!
Next they will be expecting property rights and an end to the Lord's right of the first night, the droit de seigneur the jus primae noctis! What is one to do with the peasantry these days!?!?
Everyone must sacrifice, we must do it for the children, this is a crisis (snort, chortle, oink).
is this the first step to socialise private pensions?
the IMF would just love to get their grubby hands on all that free money
well, free in the respect that they could normalise the investment returns on the appropriated pension funds in line with bank interest, ABOUT 1% if you're lucky
Fucking crooks
Don't worry, they already have plans for you 401k
http://www.infowars.com/government-to-confiscate-401ks-and-iras-for-mand...
How can anybody claim to be even the least bit surprised by this? Just wait until they go after the 401k's here in the US. They will proclaim it to be in the nation's interest to seize the accounts or buy them off at a pittance to "help insure the finacial stability of blah blah fucking blah...(insert lame political pontification here)."
True theft! Lets punish those irresponsible savers just a bit more.
labeling the measure a levy is a dodge, specifically it should be termed the embryonic stages of " Economic repression" and it is coming to a nation state near you.
domestic pensions are owned by people who have proper jobs. they do not work for the state, and are not generally sponging off the state, ie other tax payers.
so, is it intended that this pension tax will be supporting the already overgenerous pensions of the state employees.
we don't know where the state spends its (our) money, specifically, or how it is allocated, but if state pensions were to increase we can assume the funds came from domestic extra private pensions taxes.
Gordon fucking Brown betrayed the British private pension industry, once the best in the world, now a shadow of its former self, and the public sector have been partying ever since, enjoying salaries and pensions that are by anybodys standards obscene
making the hard working poor, poorer
making the feather bedded rich, richer
Only applies to private pensions, public not touched, but underwater by 100+ billion Euros. So, loot the private pensions and add them plus the insolvent public penions to the red ink on the soverign balance sheet. The Irish sure don't seem to mind getting KYd.
I see the whole world tipping towards the Ireland of old, where cartloads of produce rolled down the roads bound for England while starving Irish peasants watched with green stains on their faces from eating grass.
Why not fire every employed person in Ireland and refill their jobs at lower wages with no benefits. Think what this could do to improve hiring rates and corporate profits!
When pushed, governments will grab anything they can get their hands on. Savers=bad, spenders=good. As usual FOFOA has this one nailed:
http://fofoa.blogspot.com/2010/07/debtors-and-savers.html
Nice trick how the banksters moved all that private debt onto the public balance sheet, and only then pounded the table for austerity.
The right time for austerity was a couple of years ago - just before Ireland explicitly backed the banks.
The Irish people elected the current government on a platform of debt repudiation. The new government immediately proceeded to act in contravention of constituency. Now it should be removed; by law if possible.
Whenever a politician finds a new way to extract money from the citizenry it rapidly spreads across the world. I'm sure Jerry Brown in California, amongst other governors in cash strapped states, are eying this 'innovation' closely.
As to 'temporary', well the aforementioned Jerry Brown wants to extend for 5 more years the temporary taxes enacted 3 years ago. As they say, nothing more permanent than a temporary tax.
wonder if its pitchfork and torch time in ireland yet
http://www.bolgernow.com/blog/wp-content/uploads/2011/02/simpsons-angry-...
Thanks for taking the time to discuss this, I feel strongly about it an love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information?
<a href="http://hashbag.com/">Bubble hash bags and pollen presses</a>
If the Irish go for this without a fight with the banks I'd be surprised.
It sounds like their fight is with the government, which has failed them.
What a bunch of pikers in Ireland, what they need is more lifeguards like the ones in Pimpco's back yard in Newport Beach, Califorina.
Newport lifeguards swimming in cash
$200,000 Lifeguards to Receive Millions in Retirement
Huge sigh of relief from landowners. No need to reduce the rent to attract businesses - the government is going to provide 470m from joe public to keep businesses going. Hoover that up first before reducing the rents.
.GOV BY COOKIE JAR
When did tribute come back?
Um, when did it ever disappear?
Leo-
A little off topic but I would be interested in your thoughts on the true rationale behind the Pension Protection Act and how it affects lump sum pension payouts at this point. What would the liabilities be in the US for pensions had the calculation not moved from the 30 yr to the corp bond avg? Or, am I just understanding it wrong and the problem wouldn't be any different at this point?
The lower the discount rate, the higher the liabilities. Some people think the gvy bond rate is the appropriate rate to use, others think it's too low so they prefer higher rate.
I guess that's my point...the US switched to a higher discount rate (for reasons I am not aware of) which actually makes the liabilities look better than they would have been. I am interested in just how much a benefit this has been to pensions in the US and who/how/why this switch was made.
Thank you for the reply to my previous question.
This might be a good time to point out that Ireland's state pension funds were already raided for ten billion Euros last November, and pension contributions redirected to make bankers whole at 100 cents on the dollar. And that EUR 10 billion is just the down payment; the "bailout" provides for another 25 billion euros to be looted at need.
When the money lords put a gun to your head and tell you that you will roll your debts with money they supply at 5.8% interest into perpetuity, that ain't a rescue. It's a mob operation.
Irish pensioners are fooked, Leo. Same as all the others.
Lest no one forget; this tracks back to bailing out the Big European Banks. I do not see Iceland taxing pensions?
Hut, tutt, tutt, tutt, me boy.
A right bloody good Sheamus O'Bama idea, it is.
And all this to feed the fookin' bankers.
So, that is called Socialism. The savings are redistributed to the public to make up for the greed and failings of the government. Its happened before in the 30s .
In the end, we will be warring on each others' central banks while Skynet goes live.
So, interesting enough, will we be able to show and tell our kids that, like the 30s , any money you make is on "loan" until the government needs it to pay the lower classes so they don't go completely apeshit and riot?
Let's be honest. Government owns everything by the fact that they can take/tax anything they "need". In the U.S. you at least had to meet some Constitutional parameters but according to the Supreme Court (Kelo) not any more. The ability to tax is the indirect ability to seize. You don't own your property. You pay the bank or note holder and you pay the government rent. There is no maximum income tax rate. Anything that moves is subject to tax.
Government owns everything through taxation and eminent domain and controls anything it wishes through regulation. In fact, the State owns all of us. It's a crappy deal and we sold ourselves cheap long ago...for our own good, of course.
(quote) Anything that moves is subject to tax.
Anything that doesn't move is also subject to tax. Real estate and dead relatives come to mind for starters...
theft is theft done by gov or others..cash in your pension funds IRA's 401k's quickly, buy PM's and keep them hidden..this is war with the banks and governments, take away the blood they feed on..PM's are the only weapon we have, short of taking up guns.
Leo.
Ta DA!!! You bitched and moaned...yet here it is. Hard saved wages...and guess what is next. 70% taxation on everything to keep it all running. With current retail rates.
You got what you wanted Leo. It's action, my insane, drunken idea put here, put into action.
COME ON 70% taxation, then we can finish this nonsense of paying people that don't deserve a nickle for being stupid with their future savings and personal investments. It's at that point the "deciders" are going to die, along with their families and this can all be finished properly.
At one point in time it was just assholes grafting the pool of money to just stay home and be bums. Now...well, it's about funding medical systems isn't it...well retirement homes specifically.
That's why movingf assets offshore or into wealth that cannot be taxed becomes your prime obejctive as a Canadian.
Now that Ireland has done this they all will.
In their quest to bankrupt you the stupid taxpayer they will turn over every rock, every board, to suss out that wealth you hold.
My grandfather said that 30 years ago.
Back then he saw what Canada was doing. You would be well advised to do soemthign similar.
Taxes and size of government do affect private sector job growth......inversely though
Ireland is just another IMF bitch.
Temporary tax... ha ha ha ha! There is no such thing, just "one more extension" - then another, then another, then another...
In Germany, it was the Solidaritätszuschlag. 7% increase in Income tax to pay for the reunification. Also temporary. Started in 1991.
In Canada we called it the GST...20 years ago. We were supposed to have paid off ALL Canuck debt five years ago according to plan. But now...sigh...fuck it. Easier to not run a business and let people starve.
Don't feed a problem. Starve it. I'm waiting for them to start taxing the money I've made and saved and not just the interest. It's then I'm in the market for some very talented people...
Mkay, I'll say it.
I wonder what Bono thinks of this macro event? ;-)
another selfish piece of crap, preaches 1 thing and lives something else
those that lead by example with good sensible ideas are politically known as conservatives
those that steal the most, and are destroyers of liberty while screaming democracy are politically known as democrats or progressives
Since he moved his tax base to Holland to avoid taxes on his royalty income, he couldn't give a flying f**k! Being a typical socialist, he is in favour of taxes for others, but not for himself.
Exactly...do as I say, not as I do.
http://www.slate.com/id/2152580/
It is always someone else's problem to solve in the mind of a socialist, usually any government close at hand, as they themselves fly around the world like some plague carrying mosquito infecting everyone they land on with the hypocrisy virus and breeding more insects.
Look at where we are across the "free" world.
Banks must not be allowed to fail, they must be socialized, their balance sheets absorbed onto the public ledger of accounts? Industries (solar for one) must be subsidized (socialized) through the tax base in order to be financially viable? Equity markets must not be allowed to fall so even more public debt is required?
And now the latest...private retirement pensions must be taxed to create private sector jobs? What form of subsidization/socialism will this take? Of course everyone knows its complete bullshit. The money will be used to pay interest on government debt that they themselves created by their past policies or more likely, just skimmed off into some fetid pool of standing water to breed more mosquitoes.
I don't even know how the case can be made with a straight face.
Meanwhile in the real world, this is how it works...
"Taylor Bean was a small Florida mortgage broker before the fraud began as the housing boom took off. Fannie Mae had cited Farkas for multiple violations, but never filed a criminal referral, which would have triggered an investigation. Had it done so, Farkas might have been prosecuted and Taylor Bean shut long before it caused so much damage. Instead, it expanded, then failed, pulling down a bank with it at a cost of $2.8 billion to the Federal Deposit Insurance Corp. Farkas plans to appeal the verdict."
http://www.bloomberg.com/news/2011-05-10/why-ceos-avoided-getting-busted-in-meltdown-commentary-by-william-black.html