Fianna Fáil Finance spokesperson Michael McGrath has stated credit union savers are only now experiencing the full effect of the Government decision to increase DIRT tax rates by 8% to 41% in last year’s budget.
Deputy McGrath commented, “Traditionally many credit unions hold their AGMs towards the end of the year with the annual dividend being paid to savers in the run up to Christmas. This is a vital source of income for many families, particularly pensioners.
“Unfortunately credit union savers are set for a double hit this year as the general fall in interest rates will result in a reduction in the gross dividend payable. What will cause even greater frustration is the massive increase in DIRT payable on their savings in 2014 from 33% to 41%. This follows previous increases from 25% under Minister Michael Noonan. Some savers are also hit with 4% PRSI on their savings.
“The unfairness of this hike in DIRT can be seen from the fact that many people subject to DIRT at 41% are not top rate taxpayers, but are still hit with this punitive rate of DIRT tax. Low income earners who have put aside some savings pay the same rate of DIRT tax as millionaires. This strategy severely penalises people who are saving for expected future expenses including children’s education, medical costs and nursing home care.
“The 8% increase in DIRT will raise €140m in a full year with the Minister for Finance indicating in a Dáil reply last year that he expects to raise €625m this year from DIRT. This completely contradicts the government claim not to have increased income tax. Thousands of families rely on the income from their hard earned savings. They will be shocked at the punitive impact of government policies.
“The government has also extended the range of credit union accounts which are subject to DIRT. Dividends paid or credited to Regular Share Accounts of Credit Unions have been subject to DIRT from 1 January 2014. The exemption from DIRT which applied to certain “special term accounts” has been abolished for all such accounts opened after 15 October 2013. This will bring a lot more credit union savers in to the tax net this year.
“The banks have reacted to the DIRT increases by pressuring the Government and the NTMA to reduce tax free savings rates closing off a potential alternative for savers. This is only adding to the pressure on families”.