Tuesday, 10 February 2009
Dáil Eireann Debate
248. Deputy Richard Bruton asked the Minister for Finance if the new pension related payment to be required of public servants announced on 3 February 2009 will benefit from tax relief; and if he will make a statement on the matter. [4771/09]
Minister for Finance (Deputy Brian Lenihan): The proposed pension-related deduction for public servants will operate under what is known as the “net pay” arrangement, whereby pension contributions for PAYE taxpayers, including those in the public sector, are deducted from gross pay before the application of income tax, PRSI and the health levy.
249. Deputy Richard Bruton asked the Minister for Finance if the estimate of €1.4 billion in full year payroll savings as a result of the measures announced on 3 February 2009 is calculated before or after the impact on income tax receipts. [4772/09]
Minister for Finance (Deputy Brian Lenihan): As is the norm, the additional pension contribution to be made by public servants will attract tax relief. The actual amount of tax relief depends on an individual’s circumstances but as a broad rule of thumb it is estimated that about one third of the amount will accrue in tax relief to public servants. As a result, the €1.4 billion is a saving on the expenditure side of the account that has implications for the revenue side.
However, in terms of the economic and fiscal impact, a €2 billion adjustment was factored in to the Addendum to the Stability Programme Update published on 9 January. Therefore, the Department’s forecasts, which anticipate growth contracting by 4.5% and show aggregate taxes falling by a further 9¼% this year after the contraction of 13¾% last year, already take account of the need to secure reductions of up to €2 billion in expenditure this year.
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