(Editor’s Note: Ireland is in a tough financial spot. Unlike the U.S., it cannot simply print money to spend its way out of economic pain. So, with relatively few options, the Irish government is turning on its own citizens. Throughout history, governments have often sought to plunder the wealth of their own citizens through confiscation when they run out of options. It will be interesting to see how the citizens react to this one. Trust me, other governments with similar economic problems will be watching closely too. If little resistance is seen, expect more of this around the globe. It is because of stories like this one that I have been warning for years for Americans to keep their retirement funds diversified. 401k’s and traditional IRA’s are where Americans have been “trained” to store the majority of their retirement funds. For those of you who are interested in creating multiple streams of income in retirement, we are working hard to release a product just for you soon. Stay tuned!)
The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its jobs program strategy, delivered today.
Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today’s jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.
The tax on private pensions will be 0.6%, and last for four years, according to the report.
From the jobs initiative release:
The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.
It will apply for a period of 4 years commencing this year and is intended to raise about €470 million in each of those years. The levy will not apply to pension funds established here and providing services and benefits solely to non-resident employers and members. Further details regarding the proposed application of the levy are set out in the Summary of Initiative Measures.