I seek clarification of this section. I understand from what the Minister said on Second Stage that the Trustee Savings Banks is not paying the bank levy. The Trustee Savings Bank does not have shareholders and, therefore, does not pay a dividend. It is very difficult to find where this fits in tax law. It does not seem to be the same as any other bank. Will the Minister clarify exactly what the tax treatment of the Trustee Savings Bank will be in future given that they do not make distributions that can be taxed? He might also state, in view of the intention in the Programme for Government to change the status of the Trustee Savings Bank, what new tax regime will apply to that new entity. Will it be the one applying to the Trustee Savings Bank or will it be the tax treatment applying to the ACC or ICC?
SECTION 36.
I spoke about this at length on Second Stage. We are talking about two sections, section 35 and the preceding one. They have the effect of bringing within the charge to corporation tax the trading income of the Trustee Savings Bank. The Trustee Savings Bank is not a company, as Deputy Yates correctly said, under existing tax law. Section 35 brings the Trustee Savings Bank within the scope of the 1976 corporation tax by deeming a trustee savings bank to be a company for the purposes of that Act. Under section 337 of the Income Tax Act, 1967 a trustee savings bank is entitled to exemption from tax in respect of interest and dividends arising from a special account established by the Finance Act, 1940 and from certain investments and gilts in respect of profits or gains arising from the disposal of gilts.
Section 36 provides that the exemption in section 336 of the Income Tax Act, 1967 will not apply from 1 April 1993. As a result, the income of a trustee savings bank will be fully taxable from that date and the section provides for the transitional relief, which I mentioned on Second Stage, to phase in that full charge to the corporation tax. The trading income of the Trustee Savings Bank which is attributable to the period from 1 April 1993 to 31 March 1984 will be reduced by 35 per cent and the income attributed to the period from 1 April 1994 to 31 March 1995 will be reduced by 50 per cent and in the last period, from April 1995 to April 1996, it will be reduced by 25 per cent and the trading income attributed to subsequent periods will be fully taxed.
What are the effective rates of tax that will be paid transitionally? What will be the tax take?
It will be 10 per cent in the first year, 20 per cent in the second year, 30 per cent in the third year and I do not know if there is a calculation for the ensuing years.
I do not know how long this Government will last but it is anticipated it will last over the period of this tax regime. What will happen if there is a new merger? Will this proposal be dropped? Will it apply to normal banking tax or the bank levy?
If there is a merger of financial institutions to form a State bank then we will set down what the arrangements will be at the appropriate time.
Deputy Martin looks sceptical.
It will be another day's work for us if we are still around.