Michael Noonan
Question:24 Mr. Noonan asked the Minister for Finance if he will bring forward proposals on the tax treatment of credit unions; and if he will make a statement on the matter. [27165/99]
Priority Questions. - Credit Union Savings.
The report of the independent working group, which I established to examine the issue of the taxation of credit union savings, was presented to me in October of last year. Earlier this year I made the report publicly available. The group, which comprised officials from the Department of Enterprise, Trade and Employment, the Revenue Commissioners, the Department of Finance, representatives of the Irish League of Credit Unions, the Registrar of Friendly Societies and an independent chairman, failed to agree on a set of findings. The chairman recommended, however, that a certain amount of tax free savings for credit union members be allowed. I have received written representations from the Irish League of Credit Unions and its members in support of the recommendations made by the chairman of the working group.
When considering how best to proceed with the demands for tax free savings, including DIRT, for credit union members, one must be sensitive to the EU dimension. The EU Commission decided not to regard the corporation tax exemption enjoyed by credit unions as a State aid. A key consideration which influenced its decision is the fact that the dividends paid out of such income are liable to income tax in the hands of the credit union members themselves. This benign attitude of the Commission to the corporation tax exemp-tion could change if dividends were exempted from income tax up to a certain limit, as recommended by the chairman of the working group. This complicates the issue and should not be overlooked by those now seeking an exemption from income tax of credit union dividends.
I am fully conversant with the views of the league as they were contained in the report of the working group. Consequently, I have no plans at this stage to meet the Irish League of Credit Unions. The differing views within the working group reflect the complexity of this issue. I am giving this matter ongoing consideration and as yet have no proposals to amend the law in this regard.
In his first budget the Minister brought forward proposals to alter the manner in which credit unions are taxed on the payout of dividends in particular, but then withdrew those proposals subsequently. I put it to him that he clearly believes change is necessary. Why, therefore, does he not bring forward change now?
In the interests of accuracy, I did not bring forward proposals regarding credit unions in my first budget but subsequent to the budget, and before the publication of the Finance Bill, I acceded to a request from the Irish League of Credit Unions to meet me regarding proposals it had on the taxation of credit union savings. I pointed out clearly to the league, and it will admit this, that I had no plans whatsoever to do anything in the Finance Bill regarding credit unions, but the Irish League of Credit Unions, representing their members – or so I thought – put forward proposals on what it wanted, including the imposition of DIRT on credit union savings. I then brought forward in the Finance Bill of February 1998 proposals in that regard which started off a storm of protests from individual members. Arising from that I then withdrew the proposals, and there the matter has rested since. In the course of those consultations, I set up the working group which reported to me in the autumn of last year, and there the matter has rested since. I should also point out that when that working group was considering these matters, the issue of the EU dimension was not to the fore of its deliberations. The EU had not made a decision at that time on the complaints from a group in Ireland regarding the credit unions. I want to put the record straight in this regard. I did not bring forward any proposals in my first budget. It was after the budget when I met the credit unions, at their request, that they asked me to bring forward proposals.
The Minister's recall is correct. I should have said the budgetary process rather than the budget. At the time of his first Finance Bill the Minister felt that change in the law was necessary. Is he not simply being vindictive now with the credit union movement? It was his first major U-turn, he got his fingers burned and he has been vindictive since with the credit union movement. He refuses to meet the Irish League of Credit Unions and I put it to him that he is being vindictive and he is not addressing a problem which should be addressed. There is a need for a change of law in this area – the Minister was of that view two years ago – and the way he is now carrying on is simply an exercise in vindictiveness.
The Deputy can check this with the Irish League of Credit Unions, but I had no proposals or any intention of making changes in credit union taxation matters in the first Finance Bill. The Irish League of Credit Unions asked to see me and asked me to bring forward changes. I had no intention of making any change in that regard. My first mistake was to agree to meet the credit unions and the second was to go along with its proposals which then did not meet with universal agreement. That is the factual position on the matter.
Will the Minister agree now to meet the Irish League of Credit Unions at an early date? The Minister is aware that he has been requested by members of the Opposition and the Taoiseach to do so and he has had direct correspondence from the Irish League of Credit Unions. I ask the Minister to try to put this one behind him and at least arrange a meeting.
I received no request from the Taoiseach to meet the Irish League of Credit Unions.
He told me he was going to ask the Minister to meet them.
Allow the Minister to reply. The time for priority questions has concluded.
The Deputy may be getting confused. Before the budget, the Irish League of Credit Unions requested a meeting with the Taoiseach and the Tánaiste to discuss this matter. I have received a number of requests from the Irish League of Credit Unions to meet me as a result of this issue, but I know its views on this matter; they are expressed quite forcibly in the working group's report. There is plenty of time between now and the Finance Bill, if I consider it necessary, to make whatever changes I desire. I want to make it clear, however – the Deputy can check this directly with the credit unions – that I never had any intention of making changes until I succumbed to the wishes of the credit unions to make some changes between the publication of the budget in December 1997 and the publication of the Finance Bill. The record will show that and if the Deputy asks the Irish League of Credit Unions, it will testify to that also, as will the pub lic relations firm which requested the meeting on its behalf at the time.
Will the Minister meet them?