Scrapping ‘deemed disposal’ rule on investment products ‘would cost €142m a year’ says Finance Minister

The figure was given in the Dáil by Finance Minister Simon Harris in answer to a parliamentary question. Mr Harris is under pressure to scrap the rule in order to encourage households to make better use of savings they have sitting in no-interest bank accounts.

The rule means investors are taxed every eight years on the supposed “gains” they have made from investment products, even if they were never sold.

The Department of Finance is to publish a roadmap early next year setting out how it intends to simplify the tax framework in order to encourage retail investment. A government roadmap to be published next year is expected to include a promise to change the rule.

Mr Harris said the information given to the Revenue does not allow them to isolate the tax paid because of the “deemed disposal” rule only.

If it was assumed all tax paid by funds for their investors, all tax paid by life companies for their policy holders, and income tax paid for investments in funds were all because of “deemed disposal”, the total cost could be €284m, based on what was paid over the last eight years, he said.

However an estimate was prepared on the cost for one year on the basis that “deemed disposal” is closer to 50pc of the total paid.

“This assumption results in an estimated full-year cost to the Exchequer of €142m for no tax arising from deemed disposal being paid in that year,” he said.

“However, the actual cost in a particular year could vary where the proportion of tax deemed disposal is higher or lower, or where the gains are larger or smaller than the eight-year average used for this estimate.”