The Revenue Commissioners has written to the Department of Finance raising concerns over what the Opposition has dubbed a “massive loophole” allowing people to sink up to €2 million tax free into their pension pots.
The taxation change, which was introduced in the Finance Act 2022 by then minister for finance Paschal Donohoe, removed a benefit-in-kind charge on employer contributions to a pension pot that had previously been in place.
When asked about how the rule change was working out at the Oireachtas finance committee last week, Revenue Commissioner chairman Niall Cody told Sinn Féin’s finance spokesman, Pearse Doherty: “I would be concerned. I am concerned.”
He said that this “concern has been shared” with the Department of Finance. Mr Doherty told the committee that tax planners had been actively advertising the measure, later describing it as a “massive loophole in our tax system” that is “being exploited by the wealthiest in our society while ordinary workers struggle to save for their pension”.
‘I am back in work full-time and it is unbearable. Managers have become mistrustful’
‘Remarkable’ officer who was subject to court martial should be rehabilitated and promoted, says ombudsman
Gardaí search for potential information left behind by deceased Kyran Durnin murder suspect
Enoch Burke’s father Sean jailed for courtroom assault on garda
Mr Doherty said that under the measure, company directors can put more than €2 million into a pension in a single year without paying any tax on it, which could also be used to reduce a firm’s corporation tax bill in the process.
Prior to the end of 2022, if combined contributions by an employer to a Personal Retirement Savings Account (PRSA) exceeded a certain level – between 15 per cent and 40 per cent of net relevant earnings, dependent on age – the amount above that threshold was treated as a taxable benefit in kind. The employer was entitled to a deduction for tax purposes.
The Finance Act 2022 removed this charge following a recommendation from the Interdepartmental Pensions Reform and Taxation Group. A spokeswoman for the Revenue said the recommendations were “made with a view to improving and simplifying the pension landscape in Ireland” and would result in increased PRSA contributions.
The Revenue Commissioners said since the changes were implemented, it has been “actively monitoring” trends and data in relation to the matter. “This analysis has highlighted a number of cases which need further review and we are carrying out more analysis on same,” the spokeswoman said.
“Revenue has discussed this matter with the Department of Finance, during which a high level overview of the analysis carried out by Revenue to date was shared with the department.”
A spokeswoman for the Department of Finance said it will “always listen closely to any concerns raised by Revenue and work closely with them to address any issues that are identified to ensure tax provisions are used appropriately”.
She added: “As with all areas of tax policy, the Department of Finance is monitoring the implementation of these changes closely and will assess any evidence of misuse.”
Mr Doherty said that the existence of the measure “undermines all the principles of pension policy and tax equity and is facilitating aggressive tax planning”, adding he raised the issue with Mr Donohoe at the time “and he either did not understand his own legislation or chose to hide the truth of its consequences”.
Mr Doherty said records released to him under the Freedom of Information Act showed the Society of Chartered Actuaries wrote to the department before the change was introduced raising concerns but that recommendations it made were not incorporated to the Act.
The Donegal TD said he has raised the issue with Minister for Finance Michael McGrath who he accused of having “repeatedly ignored my concerns”.
- Sign up for push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Listen to our Inside Politics podcast for the best political chat and analysis
