Vol. 488 No. 1
25 Mr. Yates asked the Minister for Finance if he will provide details of the terms of reference of the working party established to address changes in the taxation regime applying to credit unions and related issues; and if he will make a statement on the matter. [5809/98]
Following my meeting with representatives of the Irish League of Credit Unions it was agreed that a working group will be set up with the league under an independent chairperson to examine the taxation of returns on credit union savings bearing in mind the special and particular nature of the credit union movement, its contribution to society and the wider taxation issues involved. The working group will report its findings to me by 30 September 1998. I issued a statement to this effect on 17 February 1997.
My Department is currently in consultation with the Irish League of Credit Unions regarding the composition of the working group and the appointment of a suitable chairperson. I hope to make an announcement on the establishment of the working group as soon as practicable.
Question No. 25 can be taken in ordinary time.
Will the Minister acknowledge that, even by his own standards during his political career, this has been his biggest political gaffe? Will he clarify what consultations he had with the Taoiseach during preparation of the Finance Bill? There has been extensive briefing by the Taoiseach saying he was not aware of the provision and that the Minister was instructed to take part in "Morning Ireland". Did the Minister depart from normal Cabinet procedure in relation to the Finance Bill? Normal procedure dictates that all measures in the Bill are brought before a Cabinet meeting chaired by the Taoiseach. Was the Taoiseach aware of the provision or is he being insidious in leaving the Minister for Finance out to dry on the issue? If the Taoiseach did not know, why did the Minister not consult with him on the proposed measures?
The Deputy is aware that I am not in a position to brief him or the public about what happens at Cabinet meetings, but I assure him that all procedures were fully complied with on this provision and other matters relating to the Finance Bill.
There was no contact between me and the Taoiseach, or anybody acting on his behalf, concerning this matter from the publication of the Bill on 12 February to my participation in "Morning Ireland" on 13 February. This was clarified by the Taoiseach on that day and, subsequently, by spokespersons on his behalf.
My political career has extended over a long period and I have been involved in famous or infamous matters which I would not like to prioritise.
This is well up there with the best of them.
My book will include an adequate chapter on the Irish League of Credit Unions and matters relating thereto. The issue figures on my list, but I do not know where it comes on it.
Did the Minister not read the media comments which alleged the Taoiseach was angry, upset and annoyed by this provision and the manner in which it became part of the Finance Bill? If Cabinet procedures were fully followed, with the provisions of the Bill being endorsed by it, does he not think the Taoiseach or his spindoctors were engaged in serious hypocrisy and humbug in trying to distance himself from the odium and leaving the Minister out to dry? Has he made any inquiries as to the source of these leaks and spins that have made him the sole author of this as opposed to suggesting collective Cabinet responsibility?
To the best of my knowledge the impression was given by a columnist in one newspaper. It was not repeated by anybody else. I have made inquiries and I will keep those for my book as well.
Why were the proposals that appear in the Finance Bill, which I presume will be deleted when we reach Committee Stage, not included in the advance statement issued by the Minister's Department at the end of January since we have to address the actual position? I do not expect the Minister to tell us where we expect to be this time next year but does he believe it is reasonable or fair that dividends from credit union shares should be taxable at the standard rate of tax of 24 per cent or at the marginal rate of tax of 46 per cent whereas bank deposits were chargeable on a DIRT rate of 20 per cent, or 15 per cent until last December?
The Deputy's question is bringing back ghosts from the past. He sounds very much like the Irish League of Credit Unions whose members came to see me in the middle of December with regard to putting DIRT on credit union interest. In the argument they put forward, which I accepted at the time, they said credit union interest is taxed at the marginal rate. There is a section on every person's income tax form, be they self-employed or in paid employment, which refers to credit union interest in relation to listing deposit interest. The Deputy is correct. Credit union interest and dividends are taxed at the marginal rate and the Irish League of Credit Unions put forward an argument to have certain changes made. The matter became lost in the confusion that arose on Thursday, Friday and Saturday, 12, 13 and 14 February. It was somewhat redressed in the commentary in the Sunday newspaper that weekend. There was not an anomaly regarding dividends. There is no institution in the State which does not declare its dividends. If a person has a special savings account and it is subject to DIRT, that is the end of that person's tax liability as far as the interest is concerned. Normal DIRT interest must be declared but not special savings account interest. All these matters will be addressed when the working group reports by 30 September. As of now, the position remains as it was in that interest and dividends from credit unions are subject to tax.
I asked why this was not in the advance statement in July.
The advance statement, which was made by my predecessor, covers a fair amount of what will be contained in the Finance Bill but the amendments in the subsequent list, in the Finance Bill as published and all other amendments since that time cover a raft of other areas. It simply was not possible to conclude these amendments at that stage. There was no other reason. It probably would have been better to publish it at that time so that the Irish League of Credit Unions could have done its song and dance then and not when the Finance Bill was published. Unfortunately, we were not in a position to publish the exact amendment at that stage.
It is extraordinary to hear the Minister for Finance doing his own song and dance here today pretending that he has not had to do a major U-turn. Did the Cabinet approve the Finance Bill containing the proposal in relation to credit unions before it was published? Did any Ministers at the Cabinet table dissent from the proposal or did nobody see the big hole the Minister had dug for himself?
As a former Government Minister, does the Deputy expect me to answer that question? It shows either the Deputy's innocence or my naiveté
Did the Cabinet approve it?
I have already said that all Cabinet procedures regarding the Finance Bill were fully complied with.
So the Cabinet approved it.
The Deputy is asking me what went on in Cabinet but he knows I cannot answer that question. The Cabinet approved every section of the Finance Bill as is normal.
In regard to the Deputy's first question about a U-turn, I have no hesitation in recognising it as a U-turn. I responded to the request of the Irish League of Credit Unions. It did not suit some of their members. People became very confused in the attendant publicity on publication of the Finance Bill and the position is now that which obtained before I met the Irish League of Credit Unions. Until the Irish League of Credit Unions approached me — its leaders will accept this as fact — I had no intention to do anything about any matter relating to credit unions. I told the lobbyist who approached me to meet the Irish League of Credit Unions that there was no point in such a meeting because I did not have any proposals for the Finance Bill. It is a pity I did not stick to that line but perhaps I will the next time.
Will the Minister assure the House that he will not reintroduce the draconian measures concerning credit unions at a later date or in the next budget, that is if the Minister is in the driving seat of power at that time? Why did the Minister have second thoughts on this matter? He stated earlier that certain people in the credit unions did not agree with the measures he intended to introduce. I can guarantee the Minister that 1,850,000 credit union customers did not agree with them. Would the Minister have made this U-turn were it not for the two major issues that are at stake, namely, the Limerick East and the Dublin North by-elections?
I do not think there will be a by-election in the Deputy's constituency so there is no need for him to get too excited. When one meets a representative organisation, be it the IFA, IBEC or some other, one assumes it speaks for all its members. I found that was not the case.
That is a weak alibi. The Minister has to take responsibility for his own actions.
Perhaps I should have consulted Deputy De Rossa's colleague, Deputy Rabbitte, who had the pleasure of dealing with the credit unions in the preparation of the Credit Union Bill.
The Minister should discuss it with Deputy O'Dea.
I am sorry I did not go to Deputy Rabbitte for advice. The proposals I brought forward were put to me by the Irish League of Credit Unions. I subsequently found myself in a considerable amount of hot water. I reverted to the position which existed before my changes.
The Minister had to do a U-turn.
I have set up the working group. When I reversed my changes I was inundated with responses from credit union members and credit unions telling me that I should have gone ahead with my original proposals. I say this for the benefit of those Members of the House who have been and hope to be in Government: be very careful when credit unions are mentioned.
