Economists Warn New Irish Savings Scheme May Benefit Wealthy, Cost State Billions

Two economists will inform an Oireachtas committee today that a new personal investment account (PIA) scheme, planned for the budget, could create a tax loophole benefiting the wealthy at the State's expense. The scheme aims to encourage Irish savers to move some of their €170 billion in deposits into capital market investments.

Minister for Finance Simon Harris stated in late March that the PIA regime would feature an annual flat-rate tax, likely set in the budget. This flat rate could be the sole form of taxation on these investments. However, economists warn the policy is likely regressive, benefiting wealthier individuals.

Enda Hargaden, assistant professor of economics at University College Dublin, will argue that a zero or very low tax rate on investment income could create another «hole in our tax base», adding to the existing €8 billion annual reduction in State revenue from similar tax expenditures. He emphasizes that the consensus among economists is to reduce, not add, such tax breaks.

Barra Roantree, assistant professor of economics at Trinity College Dublin, will explain that modeling the Irish scheme on Sweden's ISK system would disproportionately benefit high earners. The Swedish model taxes the total value of investments at a sub-1% rate, rather than taxing dividends or capital gains. Roantree notes this approach would grant the largest tax breaks to high-return investments, which are generally less responsive to taxation, and could even increase taxes on low-return investments, making it difficult to justify economically.