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Dáil Éireann debate -
Tuesday, 24 Jun 1980

Vol. 322 No. 9

Written Answers. - Bank Interest Taxation.

79.

asked the Minister for Finance why he has not raised the amount of bank deposits which are exempt from income tax to bring them into line with the exemption levels in respect of deposits in savings banks.

80.

asked the Minister for Finance if he is aware of the unnecessary workload being placed on officials in income tax offices as a result of the increasing number of people who come within the tax code because of the unrealistic figure of £70 earned in interest on investments on money lodged in commercial banks; and if in view of the fact that the figure has not been adjusted since 1967, he will introduce a more realistic figure.

81.

asked the Minister for Finance the reason commercial banks are being discriminated against in the proposed limits of tax-free interest and the raising of the disclosure to the Revenue Commissioners under section 175 of the Income Tax Act, 1967 to £150 for other savings institutions, while the associated banks figure is still £70, a figure which has not been adjusted since 1967; and, in view of the effect such discrimination has on people who invest their money with commercial banks, the steps he proposes to take to amend the regulations to achieve equity in both situations.

With the permission of the Ceann Comhairle, I propose to take Questions Nos. 79, 80 and 81 together.

The tax exemption limit on deposits has been raised from £70 to £150—from £140 to £300 in the case of married couples—in respect of deposits with the Post Office Saving Bank and certain deposits with the Trustee Savings Banks. The increase has been confined to the savings banks for a number of reasons.

The exemption limit is intended solely as an incentive for the small saver, and traditionally the savings banks have relied almost exclusively on the small saver for deposits. Furthermore, these banks have been losing ground in attracting deposits in recent times. There was a net outflow from deposits with the savings banks for most of 1979 and this outflow has continued in 1980. I am particularly concerned about this development since the bulk of the savings banks' deposits are lodged with the Exchequer and used for the financing of the capital programme. The increase in the amount of tax-free interest is intended to correct this situation. If the improvement had not been granted, it would have been necessary to increase substantially the savings banks' deposit rates. However, these rates are kept unchanged for long periods. The same circumstances do not apply to other financial institutions. I do not agree, therefore, that the concession represents discrimination against other banks; in fact, the tax exemption on deposit interest applies only to a very small number of banks.

The increase relates only to the exemption allowed to depositors under section 344 of the Income Tax Act, 1967, and it does not alter the reporting requirements of section 175 of that Act. Both the Post Office Savings Bank and the Trustee Savings Banks will continue to be required to disclose to the Revenue Commissioners particulars of interest paid or credited without deduction of tax where such interest is in excess of £70 and in this respect they are no different from other financial institutions.

I do not accept that there is an unnecessary workload associated with the collection of tax on deposit interest. The number of persons whose income exceeds their tax-free allowances solely by reason of having interest in excess of £70 from the qualifying institutions would form a very small proportion of the total number of taxpayers. Furthermore, in the relatively few cases where income exceeded tax-free allowances for this reason, the exemption thresholds and the marginal relief which I introduced for those on low incomes and for the elderly would, in the main, eliminate or substantially reduce liability to tax.

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