Dáil Éireann debate -
Thursday, 30 Mar 2000

Vol. 517 No. 2

Written Answers. - Banking Sector Regulation.

Pat Rabbitte

Question:

52 Mr. Rabbitte asked the Minister for Finance if his attention has been drawn to the contents of a letter written by the EU Competition Commissioner to an Irish MEP in which the Commissioner said that the Government was free to reform the credit union tax regime despite the pending European Commission investigation; and if he will make a statement on the matter. [9347/00]

Minister for Finance (Mr. McCreevy)

I am aware of the letter from Commissioner Monti to the Irish MEP regarding the complaint made to the EU Commission by the Irish Mortgage and Savings Association in relation to the tax treatment of the credit union movement in Ireland.

In the letter, the Commissioner advised that the EU Commission is currently examining the situation from the point of view of the State aid rules of the treaty. The Commissioner stated that the examination does not in principle preclude the Minister for Finance from reforming the credit union tax position. However, the Commissioner noted that any change made to the tax position may lead to different conclusions being arrived at.

The legal advice available to me is that there is no certainty that the decision on the most recent complaint by the Irish Mortgage and Savings Association will be the same as that given on the 1998 complaint which specifically related to the corporation tax exemption enjoyed by credit unions.

At the recent meeting with the Taoiseach and the Tánaiste, the Irish League of Credit Unions accepted the Government's position that com plaints about taxation made to the EU Commission must be resolved before any further moves are made regarding the taxation of credit union savings income. Any change in the law at this point, which would give special treatment to the credit unions, could aggravate the situation in regard to the investigation by the European Commission.

I am advised that it is both rational and logical to take the view that if credit union interest and dividends are not taxed either in the hands of the credit union, as is currently the case, nor in the hands of credit union members as is proposed by the Irish League of Credit Unions, the same conclusion reached in 1998 by the Commission can no longer be reached.