Ireland, the vaunted “Celtic tiger” that road the tech boom to unprecedented prosperity only a few years ago, is now set to tax private pensions to raise money for government make-work programs for the unemployed, improvements to roads and schools, and a cut in taxes on tourism.
Hobbled by a strict European bailout and facing enormous difficulties finding new lenders, Ireland has turned inward to tax its own citizens’ wealth. The government plan is to tax private savings at a rate of 0.6 percent of assets over a four-year period, a decision it expects to raise $668.2 million per year.
The move comes as the Irish government faces enormous austerity pressure and sky-high interest rates. The deficit is at more than 30 percent of GDP and national debt has reached 176 percent of the total economy, largely due to earlier, massive bank bailouts financed by the state. Irish two-year bonds recently touched an all-time high of 13 percent and the 10-year bond is at 10.62 percent.
Irish Prime Minister Enda Kenny told reporters at a press conference that the government had “hit the ground running” on job creation.
|Irish Prime Minister Enda Kenny
(Getty Images photo)
Speaking at the same press conference, reported by The Irish Times, Irish labor leader Eamon Gilmore said: “The whole focus of this government’s activity and our work is to bring about economic recovery and to get people back to work.”
The losers are, obviously, savers who expected that their private savings accounts were sacrosanct. The winners, although it remains to be seen, are employers, who will see a decline in the required payments into welfare programs. However, the plan also includes a reversal of an earlier decision to cut the minimum wage.
Value-added taxes on tourism-related business, such as restaurants, hotels, cinemas, theaters, and sports venues, will decline sharply.
Meanwhile, the state will spend millions on rebuilding roads and improving railways, other mass-transit work, and pedestrian paths and cycle-ways, plus put money into building schools. A chunk of the money will be put toward green building programs, too.
Finally, Irish political leaders expect to create 5,000 internship slots nationwide and 20,900 job-training opportunities.
Irish pension fund industry leaders estimated the cost to savers at $715 on average, taken from 750,000 Irish citizens.
Others scoffed at the idea that the tax would be short-lived. "The levy will last for at least a decade,” pensions expert Tony Gilhawley told the Irish Independent.” A 'temporary' levy on life assurance and pension premiums introduced in July 1984 lasted eight-and-a-half years.”
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