Vol. 517 No. 2
3 Mr. Noonan asked the Minister for Finance his views on whether the demand by the Irish League of Credit Unions for a fairer tax treatment of depositors' dividends and interest payments is motivated by a desire to provide facilities to evade tax; and if he will make a statement on the matter. [9371/00]
The Irish League of Credit Unions is seeking implementation of the recommendations of the chairman of the working group on the taxation of credit union savings. The chairman recommended a certain amount of tax-free savings for credit unions as follows: a continuation of the corporation tax exemption for credit unions; the first £375 of credit union members' dividend income to be exempt from tax; any excess of dividends over £375 up to £750 to be subject to 20% tax; where dividends are over £750, the entire dividend to be taxed at 20%; all interest on deposits to be taxed at the 20% DIRT rate; no reporting of dividends or interest by credit unions to Revenue.
One cannot ignore the risk of tax evasion where there are non-reportable tax free accounts in certain institutions. This issue has come to light in recent times, most notably in the Committee of Public Accounts report into DIRT, and it has been shown that when a certain level of interest income was exempt from tax in the past, a serious problem of tax evasion arose through the use of multiple accounts in different banks and branches and/or in different names, including those of relations and children. There is also general equity aspects which must be considered in relation to all financial institutions and any concessions given to credit union savers would inevitably lead to demands by corresponding savers with other financial institutions.
As the Deputy is aware, there is also the issue of the complaint which has been made to the European Commission by the Irish Mortgage and Savings Association. This complaint relates to the current tax treatment of credit unions and their exemption from corporation tax and from DIRT. In 1998 the Commission dealt with a complaint regarding the corporation tax exemption enjoyed by credit unions. The European Commission decided not to regard this exemption as a State aid. A key consideration which influenced its decision is that the dividends currently paid out of such income are liable to income tax in the hands of the credit union members themselves. If both the credit union and its members were exempt from taxation, on the basis proposed by the league, such a proposal would have to be referred to the Commission for clearance. The Commission is dealing with the existing tax position of credit unions. If the existing position has triggered a complaint, it would be reasonable to assume that further concessions, as sought by the credit union movement, would trigger further complaints which would have to be dealt with also.
The Taoiseach and the Tánaiste met the league on 24 February last. At this meeting the league accepted the Government's position that complaints on taxation made to the European Commission must be resolved before any further moves are made in regard to the taxation of cre dit 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.
Does the Minister realise that his remarks on Report Stage of the Finance Bill on 8 March last have been regarded by the credit unions as grossly insulting, particularly his suggestion that their proposals were an open invitation to people to put their money in savings which will not come to the attention of the Revenue Commissioners, and his remark that we would be inviting tax evasion if we adopted the credit union proposal, which was in effect the proposal of the chairman of the working group, and that the Deputies in this House who are supporting the credit unions' proposals are hypocrites who are advocating what they know to be a system of tax evasion for the purposes of vote catching in their constituencies? In the light of that, will the Minister now do the decent thing, apologise to the Irish League of Credit Unions and agree to meet it at the earliest possible date?
I know the Deputy to be a man who lives in the real world and I just stated the facts as they currently exist in Irish life and which have existed for a long time. A feature not unique to Ireland – it is the same throughout Europe – is that people do not like to pay income tax. That is the reason there are millions of francs on deposit in Luxembourg, mostly from German residents.
Will the Minister apologise?
I pointed out on the last occasion and on previous occasions that in the light of experience being gathered from the Committee of Public Accounts report, where there is a system of tax free interest income it is an open invitation to people to put money in those accounts, which do not come to the attention of the Revenue Commissioners. Deputy Noonan and I, and all the Deputies in this House, know that to be a fact, and so does everybody else in the country.
I take it from the Minister's reply that he is refusing to apologise to the Irish League of Credit Unions and that he is still refusing to meet this very reputable body of people. That being the case, and again noting how resolute the Minister is in his refusals, has the meeting which the Irish League of Credit Unions had with the Taoiseach any status? Is there anything to be explored as long as the current Minister is Minister for Finance? His "no" is in such absolute terms that there seems to be no scope for other intervention to ease the burden on the credit union movement? Is that a fair reflection of the Minister's position?
The Taoiseach and the Tánaiste met the credit unions and they have agreed to meet the Irish League of Credit Unions before Easter – the date will be set in due course. I am the person in this House most conversant with the views of the credit unions. There is little purpose in my attending the meeting to hear again what I have heard from the credit unions for a long time. My views on this matter have been debated on Question Time. There was also a Private Members' motion, in which I was not behind the door in giving my views. I have put my views on the record over the past two years. I also gave my views on Committee and Report Stages of the Finance Bill.
The Minister should answer the question and give us less of his autobiography.
My views are well known to everybody.
If the meeting between the Taoiseach, the Tánaiste and the Irish League of Credit Unions arrives at an agreed solution, will the Minister state in the House that he is prepared to implement that agreed solution?
At least one positive thing came out of the last meeting—
"Yes" or "no" will do.
I will answer in my own way.
The Minister always does.
At the last meeting between the Irish League of Credit Unions, the Taoiseach and the Tánaiste, the league of credit unions said for the first time that it accepted that the question of the EU complaint would have to be dealt with in the first instance. Therefore, whatever happens at the next meeting, nothing can be progressed further until the matter is dealt with by the European Commission. There are also complaints from the Irish Mortgage and Savings Association and, I understand, other directorates.
If we were looking for someone to kick to touch on Saturday against Wales, I could recommend a certain Minister for Finance.
I thank the Deputy – my skills in these matters are well known.
