Deemed disposal on ETFs was introduced in 2006 to stop investors from indefinitely deferring tax on investment gains.
In Ireland, consumers have to pay tax on an investment gain every eight years whether or not they sold up or withdrew any money.
The deemed disposal rule applies to ETFs and means investors must pay a 38pc tax on any growth in their investment after eight years, even if they have not sold it or withdrawn any money.
As part of this year’s budget, the Government brought down the deemed disposal charge from 41pc to 38pc.
However, Mr Harris said not only is the rate “too high” its presence is “posing a real challenge” for Irish investors, as the requirement to pay tax on the earnings on funds and life assurance products every eight years still applies.
“I believe it’s too high. It went from 41pc to 38pc,” he told reporters at the Central Bank,” he said.
“I actually believe the issue is broader than the rate, being honest. I believe it’s actually the policy rationale.
“It was brought in at a certain time when the landscape of investment in Ireland was very different. And I think the actual policy rationale more broadly is as big an issue.
“The pace at which we can move on all of these things in one budget will obviously be a matter for overall discussion across Government.
“But I do think the Deemed Disposal issue is posing a real challenge for Irish investors, and I do think the policy rationale for it now is questionable at best and I would like to see further progress made on it.”
The Funds Review 2030 recommended that the government remove the eight-year deemed disposal requirement.
Mr Harris was speaking at the Central Bank of Ireland, as 300 people gathered for a savings and investment forum that Mr Harris hoped would be held every year.
The forum was to discuss a savings and investment account (SIA) that Mr Harris has proposed.
Today’s news in 90 Seconds – Tuesday, March 31
Mr Harris has said in recent weeks that Irish citizens are the best savers in the EU, with around 170 billion euro set aside, but are not getting a good return on their savings due to a lack of an investment culture.
The Tánaiste said he wanted the SIA to be legislated for in the next budget and made available next year.
The account would need to offer a “simple” single rate of tax each year to be attractive to people, he said.
He said that the Government needed to ensure there was a tax system in Ireland “that is helping people who are trying to build up their own economic resilience”.
“Irish people are doing their very best to put away small amounts of money on a regular basis,” he said.
“I was in a credit union in Cork recently, I met a woman called Mary who goes into the credit union in Cork every Friday and puts a fiver in for each of her five grandkids’ credit union accounts every week.
“And she’s going to keep on doing that, and she wants to build up a little nest egg for them.
“There are examples of grannies, parents, individuals doing that right across the country.
“But at the moment, despite people doing the right thing, that’s not earning any money, and it’ll be worth less to those grandkids when they go to withdraw it than it is when they put it in. That’s what we’re trying to fix here.
“If we’re actually to build up true economic resilience, we’ve got to help middle Ireland build it up themselves.”
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