Vol. 416 No. 6
81 Mr. Howlin asked the Minister for Finance if he will outline the steps he proposes to take to provide for the changes in the deposit interest retention tax, in view of his Budget Statement; if he proposes to have an EC Directive initiated by the EC Commission in order to harmonise such taxes within the European Community following the freedom of capital movements in 1993, and if he will make a statement on the matter.
As I stated in my budget speech last January, I am presently examining all the possible implications for DIRT of the capital liberalisation programme. Whatever action is judged necessary will be provided for in the Finance Bill. It would be inappropriate for me to speculate on the outcome of that study before the work is completed and final decisions have been taken on the action required. I would like to once again reassure the House that it is not anticipated that the changes will have any effect on this year's revenue receipts.
In February 1989 the European Commission proposed a 15 per cent EC-wide withholding tax on interest income. This proposal was not implemented because of strong opposition from several member states. Although this directive has not been formally withdrawn by the Commission, it does not now seem likely that agreement will be found in the time-scale which is set for capital liberalisation. Indeed, it has to be said that even if such a measure were agreed, the issue of capital movements to tax havens outside the European Community would still have to be addressed.
In any case, what falls to me as Minister for Finance of this country is to examine the implications of the liberalisation of capital movements for this country and to consider what measures we can take to preserve our revenue to the greatest possible extent. As I have said, my proposals in this area will be contained in the Finance Bill.
