Fairer tax treatment for savers – Neville

People trying to put their money into decent savings funds are being prevented from building proper long-term financial security because of unfair taxes, a Fine Gael TD has said.

Deputy Joe Neville said that a review needs to be carried out to reform the tax treatment of ordinary investors.

Deputy Neville said: “Irish households save just under 15% of their disposable income, or €1 in €7 of net funds leftover after other bills are taken care of. But are they getting a decent return on their investment? Current rules don’t properly incentivise people to continue to keep putting their money into savings.”

Deputy Neville highlighted that in many other countries, Exchange Traded Funds (ETFs) offer a logical and responsible way for ordinary savers to invest for their futures. ETFs are a mix of bonds and commodities that trade during market hours, which allows investors or savers to track and control what they trade in, at a lower risk, if required.

“The problem currently in Ireland is that ETF taxes are prohibitive for many ordinary investors, the majority of whom who have a modest financial pot that they want to work hard for them to generate the maximum return. The reason for this is that a 38% tax is imposed on any unrealised gains after 8 years.

“This means that if a fund increased in value over a period of time, the investor is penalised by a tax bill just shy of 40% of the cost of the higher value.

“In simpler terms, this is akin to being hugely taxed on any investment. Traditionally, a person or couple’s greatest investment would be their home. Imagine having to pay tax to the tune of 38% on a house which has increased in value over time? Buying a property does not come without a lot of work and effort and similarly, setting aside money to save or invest requires the same effort and commitment. It is wholly unfair therefore, to face such a high tax penalty.

“Investing should no longer viewed as something only the wealthy can do. More and more people want to invest to secure their futures, so we must ensure the state is not putting unnecessary blockages in their path.

“This tax on unrealised gain undermines asset growth and penalises prudence and we as a government must review this so that ordinary people of Ireland can have another safe mechanism to grow their spare funds.”