I move:
(1) THAT, as respects any payment or crediting of relevant interest (within the meaning of Chapter IV (Interest Payments by Certain Deposit Takers) of Part I of the Finance Act, 1986 (No. 13 of 1986)) made on or after the 6th day of April, 1995, subsection (1) of section 31 of the Finance Act, 1986, be amended by the substitution in paragraph (a) of the definition of "appropriate tax" (substituted by section 22 (1) (a) (i) of the Finance Act, 1992 (No. 9 of 1992)) of "15 per cent." for "10 per cent.".
(2) THAT, as respects the year of assessment 1995-96 and subsequent years of assessment, subsection (3) of section 14 of the Finance Act, 1993 (No. 13 of 1993), shall apply and have effect as if this Resolution had not been passed.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
This resolution provides for an increase in the rate of deposit interest retention tax on special savings accounts from 10 per cent to 15 per cent with effect from 6 April 1995. Interest paid or credited to a person's account prior to 6 April 1995 will be subject to DIRT at the current 10 per cent rate while interest paid or credited on or after this date will be subject to a 15 per cent rate of deposit interest retention tax.
Special savings accounts were introduced in 1993 following the abolition of exchange controls to counteract the threat of capital outflows while preserving deposit interest retention tax revenues as far as possible. Their introduction was dictated by the failure to reach agreement at EU level on common rules governing the taxation of deposit interest. These accounts which have attracted funds in excess of £3 billion have enhanced the competitiveness of Irish financial markets and have contributed to a stable, healthy deposit base in the country. The Government is satisfied that such benefits can continue to be achieved with a 15 per cent deposit interest retention tax rate. This will help to reduce the imbalance between taxation on earned and unearned income while maintaining an attractive fiscal incentive for deposits to remain in the State.
A 15 per cent rate, being the final liability to tax on interest received, will still leave depositors with a competitive after tax return on their investment. The increase in the rate of deposit interest retention tax will yield an estimated £4 million in 1995 and £7 million in a full year. No change is proposed in the 10 per cent rate applying to special investment accounts operated by stockbrokers, insurers and unit trusts. The Government consider it appropriate to have a lower rate for these investors which, unlike investors in special savings accounts, are required to invest at least 55 per cent of their portfolio in Irish equities with 10 per cent of the portfolio in small to medium-sized companies.