2026-02-24

The deemed disposal tax on unrealised gains for exchange-traded funds, ETFs, is simply madness. We often speak in this House about opportunity, fairness and giving people a real stake in our economy. We need to ask ourselves honestly what kind of Ireland we are shaping through our current tax system. Do we want an Ireland where ordinary workers can build wealth slowly and steadily over time, where someone on an average income with €100 or €200 he or she can put into a savings account a month can participate in the markets and benefit from long-term growth? Are we content with a system where real tax efficiency is saved for the few who can afford complex advice and sophisticated structures? At the moment, when it comes to ETF investing, that is the signal we are sending. If a young person decides to invest modest savings into a diversified fund and hold it for the long term, they can be taxed on gains they have not even realised. They have not sold, they have not received income, they may not have even seen a cent in their account, yet they face a tax charge simply because time has passed. That cuts across a basic principle that we have in this country, that is, we tax income or gains when they are actually realised. It also undermines compounding, which is how ordinary people build security. It is how small, consistent investments over 20 or 30 years turn into something meaningful; a deposit, a cushion, a sense of independence. It is vital to say that, as I understand it, approximately €66 million a year is raised from the deemed disposal tax. The Government is leaving a lot of money on the table by not allowing people to compound over time and actually tax the gain when people are ready to realise it. Taxing an unrealised gain is an unfair principle. As we all know, the markets can go any way, any day and nobody knows the better but the reality is that people who are patient and wait for the long term are rewarded. If we are serious about broadening ownership, spreading opportunity and building long-term capital in this country, we cannot penalise patience and discipline. We have to remember that we are in a global competition when it comes to capital markets and with the opportunities that exist at the moment. It is important to highlight as well that young people primarily see the benefits of investing in a pension from a tax efficiency perspective. The problem is that not everybody wants to wait until they are 66 years old to draw down money or to avail of the money they have accumulated. They want to be able to live life as and when they need to. They never know when a crisis or an opportunity might arise whereby they need to access their money. I think people want to have that freedom to be able to do so. A fairer system would reward long-term investment, as opposed to penalising it. It would treat people consistently and give every worker a genuine chance to accumulate. It is time to reform this rule and build an Ireland where ownership is not concentrated in the hands of a few but is shared more widely across society.

I thank Deputy Dolan for raising this important issue of supporting savings and investment. I fully agree with everything he has said. We need to look at areas where we can incentivise wider participation in retail investment and to activate the €170-odd billion that is sitting idly on demand deposits in this country. According to the Central Bank of Ireland’s retail investor participation report, published in December of last year, Ireland has one of the lowest levels of direct retail participation in capital markets in the EU. Encouraging retail investment is set out in the programme for Government and is consistent with the work at an EU level on the savings and investment union. Ireland will be taking a leadership role in this regard during our Presidency of the EU Council later this year. The deemed disposal rule is a part of the current taxation regime for investments in Irish-domiciled investment funds and life assurance products, as well as equivalent offshore funds and certain foreign life assurance products, and generally applies to ETFs, as Deputy Dolan has said. Under deemed disposal, tax is levied eight years after an investment is made and every subsequent eight years, regardless of whether a disposal has in fact occurred. The tax is levied on any gain in the value of the investment from the date of acquisition to the date of the deemed disposal. On the ultimate disposal of the investment, any tax paid is allowed as a credit against the final tax liability. Surprisingly, I must admit that as it stands now, we do not have a full, clear picture of exactly how much deemed disposal generates annually in tax. That is something we are going to have to ask Revenue to figure out and come back with the precise details. However, I do believe we need to start thinking about the cost of not doing something and the opportunity missed out on. More favourable tax drives economic activity. Prior to budget 2026, I advocated strongly to our then Minister for Finance, Paschal Donohoe, that deemed disposal be removed in its entirety and that we reduce the associated tax rate to be in line with our capital gains tax rate. I accept it was easy for me to say, as I was not framing the budget, and a Minister for Finance has competing demands. To his credit, he did signal elements of the funds review recommendations to be actioned. Budget 2026, in addition to reducing the rate of tax that applies to these forms of investment, included a commitment to publish a roadmap for the taxation of retail investment as included in that funds review. The roadmap will set out an approach to simplify and adapt the tax framework to further support retail investment while applying necessary and important anti-avoidance protections in a proportionate manner. It is expected to be published shortly. There was also a commitment in budget 2026 to launch a forum looking specifically at a savings and investment account product. That forum will kick off later in March, convened by the Tánaiste and me. Later this week, I will convene a round table with senior industry leaders to discuss the Ireland for finance strategy. I have no doubt that a supplementary item on the agenda will be how we mobilise people to look at better returns on their savings. It is a concept that is easy to announce for headlines but the devil will be in the detail. Any product or package we introduce must be attractive, simple and something that the people want to participate in. It is vital that we get this right.

I really appreciate the sentiment the Minister of State has delivered before this House. There is an opportunity here for the Government to send a clear signal that for people who are working and contributing to our society and who want to accumulate a security buffer or a cushion, we will support them to do so, not just for their pension but for when other things arise in life as well. I believe that the deemed disposal must go because I fundamentally believe it is unfair to tax somebody on an unrealised gain. I also agree that it is vital that whatever we put in place has to benefit people and work properly. In the UK they have the ISA-style saving account. In the US they have a Roth IRA account. These are unique and novel ideas where you can give tax efficiency on smaller investment amounts or you can decide not to tax the capital gain or you can decide to allow people to accumulate more. We have to acknowledge in this House that we do not have the same stock exchange here in Ireland that we once had. Our stock exchange is weak and companies are choosing to list on markets where they can access greater capital. We have to look at that. Perhaps it would make sense to incentivise people to invest in Irish companies. I believe the employment investment incentive scheme, EIIS, works really well but it is a very concentrated risk. You invest in a company with EIIS and it ultimately is a start-up with a higher probability of failing than a diversified fund. If you invest in a fund, you have an opportunity to spread your risk across multiple companies. I really do believe that if we encourage people to invest in the Irish stock exchange tax efficiently, we would see more Irish companies investing here in Ireland and raising capital in Ireland. We would also see Irish people being very proud to have a share and ownership in Irish companies.

I thank the Deputy again for the opportunity to discuss this important topic. While the Deputy's question focuses on one aspect of the current tax regime, it is clear that the overall approach to taxation of retail investments needs to be considered. Stakeholders including individual investors and industry participants have made their position on the current approach, including deemed disposal, clear. Capital markets provide an opportunity for savings to be more productive for both the individual and the wider economy. Taxation plays an important part in what has to be considered when looking at how to encourage retail investment. As I alluded to in my opening remarks, the Department of Finance is closely examining the concept of a savings and investment account. It can provide framework, as the Deputy alluded to, for ordinary savers to benefit from the opportunities available through participation in the capital markets, but we must get the detail right. Those details are within the funds review recommendations. As a Government, we cannot be looking for reviews only not to implement their findings. The roadmap on taxation of retail investment will be published shortly and will set out the intended approach to encourage retail investment in Ireland, including consideration of savings and investment accounts. I expect further discussions will be had on savings and investments as the development of a new approach to taxation of retail investment proceeds. I look forward to continuing engagement with the Deputy on these issues.