asked the Minister for Finance if he will state the annual rate of interest payable on the Marshall Aid Loan, and indicate whether the interest payable is free of tax, if he will further state assuming the interest was payable to an Irish insurance company and was subject to income-tax and corporation tax what gross rate of interest the loan would have to carry in order to give the insurance company the same net yield as is paid in interest on the Marshall Aid Loan and also what the position would be if the recipient of the Marshall Aid rate were an Irish citizen who was liable to income-tax and surtax at the highest rate now obtaining.
Ceisteanna—Questions. Oral Answers. - Marshall Aid Loan Interest.
The rate of interest payable on the Marshall Aid Loan is 2½ per cent. per annum. This interest, being payable to a foreign Government, is free of tax. A rate of 2½ per cent. free of tax would be equivalent to 4 4/9 per cent. gross if payable to an Irish insurance company chargeable to corporation profits tax at 10 per cent. and to income-tax at 7/6 in the £, or 12½ per cent. gross if payable to an individual chargeable to surtax at the maximum rate of 8/6 in the £ and income-tax at the standard rate of 7/6 in the £.
Will the Minister give us the figure at which his 5 per cent. National Loan, which includes a free income-tax provision, would be payable if grossed up in the same way; would it not work out at 22 per cent. and not 12½ per cent?
Any modification I might have to make as to the real effect of the rate of interest on the last 5 per cent. loan would have to take into consideration that 90 per cent. of that loan was taken up in this country and 90 per cent. of the interest will be paid and will be subject to income-tax, corporation profits tax and surtax, as the case may be; that 100 per cent. of the Marshall Aid Loan has been taken up outside this country and all the interest payments and repayments will take place outside this country. It is in fact an expenditure of a gross uneconomic kind.
Why did you spend £24,000,000 out of it and why did you give 22 per cent.?
All I can say is that the £24,000,000 was to honour your debts.