This page has been archived and commenting is disabled.
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.
»
- advertisements -
Not sure Ireland wants to go down this path.
The people of Ireland do not. The people that run Ireland do.
thats the soltion to the independence problem...destroy the savers & investers... deinsentivize those that produce so that they can be just as easily manipulated as most unionized workers in order to create the perfect socialized dictatorship... more sheep for the real wolfs to eat? naaaaaaaa
Independence was an illusion...
Problem for Ireland is that the pensions funds offer a guaranteed return to the pension holders.
So this tax can't be passed to the "customer" because that would be breach of contract and should default the funds.
SO! This tax will have to come from corporate profits. But.... like we all know... pension funds are on the brink of default as we speak and can mostly not guarantee payouts to 2016.
This is just taking money from the very near future!
Whatever they take from the pension funds and which is not put back in after 12 months will only speed up the pension defaults.
This isn't bad, THIS IS DRAMATIC!
Not many people actually know how these pension systems work and they are pretty complicated. But this pension tax is calculated on 2007 returns (of 12,5% average).
This is so shortsighted that it's scary!
Ireland is clearly willing to destroy their pension funds and stealing from the old.
Those who decide this now will be gone when the pension funds start to implode starting 2016. But the people who depend on it NOT.
The reason why so few complain right now is because these pension funds offer the people who invested in it a secondairy pension which they can use above their low government pension.
NOT EVERYBODY CAN LIVE OF GET BY WITH A GOVERNMENT PENSION!!
The old people don't care. They still think they talk about the comming generation and they couldn't care less about these youngsters who make to much noice anyway.
But they will soon be affected. Most of the people can't take care of their parents so poverty will skyrocket because of the defaults. And suddenly they'll expect the "young people" to give a fuck.
I not so the future generation who will retire in the comming 30 years or so. It's the current retired people who will suffer.
And that's why the youngsters won't give a shit.
So nothing will be done against it. Nobody will give a fuck. Untill it's to late.
I also don't really give a fuck about them. Only my parents. And they are rich enough to also don't have to give a fuck.
Don't you worry about the Paddy's, my rambling drunk friend.
At least they'll never end up like belgium.
http://www.dailymail.co.uk/news/article-1385681/Outrage-remorseless-ex-w...
HAHA!
At least we catch the child rapists :)
In your country they get to write a book and star on television for a million dollars.
This shit is everywhere. But it takes guts to catch them. In most countries the elite is so powerful and so deep in the shit themselves that you'll never know.
People like you like to put their heads in the sand while their own children get raped. Nothing to be proud of.
Take England for example. That's probably the worst country in the world. Even 100 times worse thant you'r America!
I you ever see those beast in the flesh and throw some beer in the group, it only takes 5 minutes before they start to fuck dogs. In England for example, you have THE MOST teenages from 10 and 11 year old who are pregnant!!! And mostly they don't even know who the father is because those kids where to drunk!!
Now that's a Island that should sink away in the Ocean. And if it does, let's all pray that the fish don't all get raped....
Catch them, let them go, catch them again...
Sad about England - where do you think it went wrong?
Was it that the beer was so good?
No, on the whole, the beer over here is mass produced Cat Piss from the likes of InBev et al...
However, beer is sold at a loss over here by supermarkets as a 'loss leader' or so we're told. Just like water is fluorinated to 'keep our teeth healthy'...
....and as you americans know the british stereotype all too well - that flouridization didn't work out too well for us
If you do fancy a beer when in the UK try a Real Ale Pub. Some of the stuff on tap in those pubs is quite decent.
http://tinyurl.com/3a9zb48
The jobs initiative is a bad joke--but the Irish govt is as adept at theft as any other.
That's one way to handle the pension underfunding/overhang.
Are we not fed up with governments 'creating' jobs?
If there is no need for the task in the first place then 'creating' this job can only require further taxation to maintain its pointless existence in the future...
It is time to cut the deficits, not tax everything to oblivion.
Ireland simply needs to default.