Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Thursday, 27 Jan 1972

Vol. 258 No. 5

Ceisteanna—Questions. Oral Answers. - Credit Unions.


asked the Minister for Finance whether, in view of the notable social and economic value which they represent in local communities, he will by generous taxation concessions encourage the extension and expansion of the credit union movement in the Republic.


asked the Minister for Finance if he will consider exempting credit unions from payment of taxation.


asked the Minister for Finance under what authority it is proposed to tax credit unions; and what the estimated annual revenue from this will be.


asked the Minister for Finance if he will make a statement on the representations received to date by his Department from the Credit Union League of Ireland concerning the decision to tax certain funds of credit unions.

I propose, with your permission, a Cheann Comhairle, to take Questions Nos. 44 to 47 together.

Credit unions are, and always have been, under the general tax laws liable to income taxation on their operating surpluses, as computed for tax purposes in the same way as other concerns carrying on activities involving the acceptance of money and the lending of money at interest. In particular, credit unions are registered industrial and provident societies in accordance with the provisions of the Credit Union Act, 1966, which followed generally the recommendations of the Committee on Co-operative Societies set up by the Minister for Industry and Commerce. The committee had recommended that the Industrial and Provident Societies Acts should be suitably amended in order to make provision for the registration of credit unions. The 1966 Act, in so providing, removed the legal difficulties in the way of the formation of credit unions in this country by providing a suitable legislative framework within which they could operate and which had been represented by the credit union movement as necessary for their future development. Indeed, since the passing of that Act, credit unions have grown in number and in size. Today, there are, it is understood, about 340 credit unions with assets of some £10 million, so that they no longer fall within the category of money clubs or holidays clubs which are, in effect, concessionally charged to tax on a restricted basis similar to that applied to credit unions themselves up to the time they became registered industrial and provident societies.

The question of the tax position of industrial and provident societies, or co-operative societies as they are commonly known, was considered specifically by the Commission on Income Taxation which recommended, that in general, these societies should be charged to tax in the ordinary way. The Government accepted the principle of the commission's recommendation and provision was made accordingly in the Finance Act, 1963. As registered industrial and provident societies, credit unions are accordingly fully liable to tax on their surpluses.

I might add that the effect of taxation on credit unions is unlikely to be significant. Under statute credit unions are favourably treated in regard to payment of tax in as much as interest and dividends paid to their members are deductible in computing their tax liability, being assessed to tax in the hands of the members. Only the remaining profits are assessed to tax and, in so far as credit unions are normally operated on a non-profit making basis, these profits are not presumably of a sizeable order. It is estimated that the average tax charge per credit union would be about £100 and that the total amount of tax payable by credit unions annually should be of the order of £30,000.

I recognise the important social role being played by credit unions and I am accordingly examining as sympathetically as possible their position under existing tax law.

In view of the fact that the Minister has been examining this position for the past six months, could I ask him whether he will be able to arrive at a decision very soon and certainly before the next Budget? Would the Minister accept that, in view of the unique social position of the credit unions in this country the taxing of their surpluses and the general covering thereof by the tax laws, even if it only amounts to £100 per annum per credit union, would still be a substantial bodyblow to these organisations which have made such a distinctive and valuable contribution to the nation?

Is the Minister aware of the very widespread concern among the membership of the credit unions about the proposal to tax them for the first time? Is the Minister also aware that a number of people have already told the credit unions that they intend to withdraw from them because of this tax proposal? The people may misunderstand what is involved, but they are leaving the credit unions because it is now openly said that credit unions are going to be taxed.

The Deputy is right when he says that there may be some misunderstanding in this regard. It is not a question of credit unions being taxed for the first time. The law has not been changed in regard to them.

They have been paying tax every year?

The law has not been implemented yet.

I understand that it has. The law has not been changed. I will not argue with the Deputy. What is being urged and what I am considering is whether the law should be changed in favour of the credit unions.

To continue the non-implementation?

I am aware of the importance of the social role of the credit unions. In answer to that interjection of Deputy FitzGerald, I mentioned in my reply that there is a form of concessionary treatment of certain kinds of bodies, like holiday clubs and so on, which is long-established practice, under which credit unions were treated in the past before they came under the provisions of the ordinary income tax law relating to industrial and provident societies. The only change which took place was when the Credit Union Act was passed at the request of the credit union movement. One of the defects of that was to bring credit unions under the ordinary income tax law. What they ask now is that they should be taken out of it. I should like people to be clear that that is what the position is and that that is being examined sympathetically.

Would that require legislation?

To take them out would.

Can the Minister say in how many cases the law has been implemented? Has there not been a continuation, de facto, of the concessionary treatment and why is it now proposed to end that position and why has the issue arisen at this stage, six years after the position has been changed legally? Did the credit unions understand the implications of the change from the tax point of view?

I can only assume that they did.

Was that made clear to them at the time?

There was a long and considerable investigation at that time and I am quite sure all of these aspects were gone into.

When is the Minister likely to reach a decision in the matter?

I should not like to anticipate.

Would the Minister agree that when £30,000 is involved——

That is not the only consideration.

Would the Minister agree to introduce a new section in the next Finance Bill?

Let us worry about that when it arises.