Dáil Éireann debate -
Tuesday, 3 Mar 1992

Vol. 416 No. 6

Written Answers. - EC Restrictions on Movement of Capital.

Theresa Ahearn

Question:

50 Mrs. T. Ahearn asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC treaty article prohibiting restrictions on the movement of capital both between member states, and between member states and third countries.

Louis J. Belton

Question:

71 Mr. Belton asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC treaty article prohibiting restrictions on the movement of capital both between member states and between member states and third countries.

Andrew Boylan

Question:

77 Mr. Boylan asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC treaty article prohibiting restrictions on the movement of capital both between member states and between member states and third countries.

Madeleine Taylor-Quinn

Question:

80 Mrs. Taylor-Quinn asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC treaty article prohibiting restrictions on the movement of capital both between member states and between member states and third countries.

Fergus O'Brien

Question:

110 Mr. O'Brien asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC treaty article prohibiting restrictions on the movement of capital, both between member states and between member states and third countries.

Mervyn Taylor

Question:

119 Mr. Taylor asked the Minister for Finance the actions, if any, he proposes to take to protect the deposit base of Irish financial institutions, including the banks and the building societies in view of the change in capital movements which will come into effect in January 1993; and if he will make a statement on the matter.

John Browne

Question:

124 Mr. Browne (Carlow-Kilkenny) asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC Treaty article prohibiting restrictions on the movement of capital both between member states, and between member states and third countries.

John Bruton

Question:

181 Mr. J. Bruton asked the Minister for Finance if he will outline the implications for the Irish tax system of the new EC Treaty article prohibiting restrictions on the movement of capital both between member states, and between member states and third countries.

Minister for Finance (Mr. B. Ahern)

I propose to take Questions Nos. 50, 71, 77, 80 and 110, 119, 124 and 181 together.

Article 73b of the new Treaty on European Union signed by the representatives of member states on 7 February provides that "all restrictions on movement of capital between member states and between member states and third countries shall be prohibited."

The Deputies will be aware, however, that according to Article 73d, this provision is without prejudice to certain specific rights of member states, including their rights to continue to apply their own tax laws and to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation. In view of this, the new Treaty should have no direct implications for Ireland's tax system.

However, I recognise that, with full liberalisation, the potential for movement of capital, whether out of or into Ireland, will be significantly greater than in the past. The nature, direction and scale of actual flows will, of course, depend on the interplay of the many factors which enter into the decisions of investors. These include comparative interest rates, the rates of return on various investments, perceptions of exchange and other risks, the relative cost of funds as well as the position as regards taxation. I am still considering all the possible consequences of the complete exchange liberalisation which will exist in relation to other member states from the end of this year. In particular, as I indicated in my Budget Statement, the implications for future revenue from the deposit interest retention tax, and possible measures to deal with that situation, are under examination in my Department, and any necessary legislative changes will be provided for in this year's Finance Bill.

As regards the Irish financial institutions, we have to accept that the creation of a single Community market will result in increased competition throughout the Community. I am confident, however, that our financial institutions will respond positively to the challenges and opportunities offered by the Single Market.