McCreevy announces money-saving incentives

The Minister for Finance, Charlie McCreevy, has announced new measures to encourage people to save money. The details of the scheme are included in the Finance Bill which was announced this afternoon. Under the scheme, for every £4 saved over a five-year period, the Government will give the saver one extra pound. The Bill also allows for tax relief on share options for employees who will pay capital gains tax on shares instead of income tax. He also introduced tax relief on individual contributions to charities and other bodies such as educational establishments.

The money-saving incentive scheme will commence on 1 May 2001 and savers will be asked to save for five years. The scheme will be open for one year. The detailed legislative provisions of the scheme will be published before the Committee Stage of the Bill. Officials in Europe will monitor today's Bill carefully, following Monday's formal reprimand by EU Finance Ministers to Ireland over its inflationary budget policy.

On the new tax regime for share options, Mr McCreevy explained that the change meant that under certain approved schemes, employees will not have to pay income tax when exercising share options, and that the full gains would be liable to capital gains tax when shares are disposed of. To qualify, at least 70% of share options in a scheme will have to be open to all employees with not more than 30% available for key employees.

The Minister indicated that a number of further taxation measures might be included in the Bill as it passes through the Oireachtas. The measures would arise out of the recommendations that may be made in the further report of the Public Accounts Committee on DIRT matters, should that report become available in the next few weeks.

The Fine Gael Finance spokesman, Jim Mitchell said that any attempts to encourage savings must be welcomed in principle but he felt the banks, who will operate the scheme, will probably be the biggest winners. Labour's Derek McDowell said that the introduction of favourable tax treatment for share options was unfair and opened the way for tax and PRSI evasion. Welcoming the savings scheme, the Business and Employers' Confederation said that it delivered on three of its budget proposals.

The full text of the Finance Bill is now available on the Budget 2001 site.