Deposit Interest Retention Tax
From Wikipedia, the free encyclopedia
Deposit Interest Retention Tax (DIRT) is a form of tax on interest earned on bank accounts in Republic of Ireland that was first introduced in the 1980s. In Ireland, income from any source is reckonable for taxation purposes. The Revenue Commissioners believed, not without reason, that the large majority of interest earners were declining to report it and that the most efficient method to collect at least the basic rate tax would be to deduct it at source. After PAYE, it was Ireland's first experience of a withholding tax.
It was controversial because taxpayers cannot withhold it in protest because it is taken at source. Some argued that it discourages saving among low-income families, who would not otherwise be liable for taxation, but who might also not understand the need to claim exemption.
[edit] Evasion
In the late 1990s a parliamentary inquiry under Jim Mitchell, TD, established the existence of a culture of encouraging tax evasion within Irish banks, which had allowed wealthy customers to set up non-resident (off-shore, international) bank accounts into which money was transferred, enabling the account holder to avoid paying DIRT. (Such accounts in theory should only have been set up by foreign investors, who would of course pay any tax due to their local authorities.) Thousands of tax-evaders were prosecuted as were leading banks, producing hundreds of millions of Irish pounds of the Irish Exchequer through financial settlements and fines. Several famous Irish people have been found evading the tax, including (former) Minister for Justice Pádraig Flynn.
