asked the Minister for Finance whether building societies enjoy preferential tax treatment in consideration of their providing mortgage funds for house purchase; and, if so, whether this preferential tax treatment is consistent with the advance by such societies of thousands of pounds to finance the purchase of business premises and office accommodation for commercial purposes at high interest rates.
Ceisteanna—Questions. Oral Answers. - Building Societies: Preferential Tax Treatment.
27.
When corporation profits tax was introduced in 1920, a temporary exemption of three years duration was accorded to building societies. This exemption, which was granted apparently because the primary function of such societies was regarded not as the earning of profits but as assisting in the provision of houses, has since been renewed at three-yearly intervals. The present exemption is due to expire on 31st December, 1967, and the question of its continuance for a further period will be reviewed in connection with next year's Finance Bill.
Building societies also have the benefit of an administrative arrangement with the Revenue Commissioners under which persons who invest with them amounts up to £5,000 may receive interest free of income tax. The income tax is paid by the societies at a composite rate fixed so as to avoid loss to the Exchequer. This arrangement is due for review after 1968-69.
The returns for building societies in respect of the year 1966 show that, out of a total of 3,027 advances made in the year, only 14, representing 3.6 per cent, of the total amount advanced by all the societies in the year, were in respect of amounts over £10,000. This seems to indicate that advances by building societies to finance the purchase of business premises and office accommodation form only a small part of their total business and that the primary function of building societies is still the provision of assistance in the purchase of dwelling houses.
I wonder has the Minister had an opportunity of discussing this matter with his colleague, the Minister for Industry and Commerce, and, if so, would they agree that, even though the percentage of loans negotiated may appear small, the lending of large sums of money at relatively excessive rates of interest for the speculative building of business premises or office blocks is not consistent with the fiscal advantages provided for building societies on the assumption that they will mobilise small savings to facilitate the provision of housing?
The Deputy will, I think, be aware that the percentage of the total amount advanced by building societies for the purpose he mentions is quite small, but I am sure the Minister is aware of that about which Deputy Dillon is concerned and will take due notice of the Deputy's concern.
I am obliged to the Parliamentary Secretary. May I further inquire, if the facts should reveal that the small percentage of what we may describe as inappropriate loans is being made by one or two societies, while all the larger societies are conforming with the normal practice, would the Minister give special attention to the societies which, it might be surmised, were established under the Building Societies Act for no other purpose than to channel money into enterprises in which they themselves have a personal concern?
I will convey the Deputy's anxiety to the Minister.