A single flat rate of tax will apply to the Government’s new savings scheme, Simon Harris has announced. 

The Tánaiste and Minister for Finance has criticised the current tax system as too complex, which he believes deters investment. 

Minister Harris added that while the tax rate that will apply to the new saving scheme has not yet been decided, he expected it would be competitive. 

On Newstalk Breakfast, Money Doctors.ie founder John Lowe said Irish people are generally good at saving, but many are getting a poor return on their hard earned cash. 

“There's 173 billion out there in the Irish deposit accounts,” he explained. 

“And the Minister for Finance has decided it's about time that the banks started offering a decent rate of interest. 

“I mean, the best demand rate at the moment in the country is An Post money with their 0.75% interest - and that's before tariff tax, by the way.” 

Euro currency. Picture by: Mirco Cordes / Alamy Stock Photo.

Mr Lowe added that one of the interesting economic effects of the pandemic was that people were unable to spend money on the things they normally enjoy doing. 

Instead of the money circulating in the economy, they saved it instead. 

“They had crisis after crisis; the various wars, the various coronaviruses,” Mr Lowe said.  

“During coronavirus, they couldn't spend money. 

“So, they saved it and suddenly they find they've got this huge amount of money and they've done nothing with it because they don't want to lose money.” 

Various countries across Europe offer their citizens tax relief if they invest in a savings account. 

The Government is understood to be looking at Britain’s ISAs, which allow people to save £20,000 (€22,900) a year tax free. 

“The Minister also announced a few days ago that there will be no Capital Gains Tax on this,” Mr Lowe added.  

“So, you can assume that up to €28,000 is going to be tax-free. 

“So, a flat rate of annual tax after that, which is about, in Sweden, it's about 1%, just over 1%.” 

For those fortunate enough to have a large sum of money saved, Mr Lowe recommended investing it in the stock market. 

“The stock market is the best investment, bar none, of any asset class,” he said. 

“From 1991 to 2020, the average annual growth in the stock market was 10.72%. 

“Plus the fact that probably the best vehicle to hit in terms of the stock market is the simple insurance managed fund.”

Main image: Simon Harris. Picture by: Sasko Lazarov/RollingNews.