Dáil Éireann díospóireacht -
Tuesday, 23 Mar 1999

Vol. 502 No. 3

Written Answers. - Credit Unions.

John V. Farrelly

Ceist:

267 Mr. Farrelly asked the Minister for Finance when the review committee which he set up in conjunction with the credit unions submitted its findings; the reason he is not accepting these findings; his views on whether the nominees he appointed to this committee did not agree with the report; the plans, if any, he has to change his position on this issue; and if he will make a statement on the matter. [7620/99]

Minister for Finance (Mr. McCreevy)

I set up a working group last year to examine the taxation of returns on credit union savings. This group, under the chairmanship of Mr. Terence Larkin, was comprised of members of the League of Credit Unions, the Registrar of Friendly Societies and senior officials from the Department of Enterprise, Trade and Employment, my Department and the Revenue Commissioners. I received the report of the working group last October and I recently made it publicly available.

It was not possible for members of the working group to reach a consensus and, in the absence of an agreed position, the chairman made a number of recommendations, namely, that credit union surpluses should continue to be exempt from corporation tax; 20 per cent DIRT should apply to interest on all credit union deposits; 20 per cent DIRT should apply to all dividends from shares except where the dividend in any year is £750 or less, and in such cases only the first £375 would be exempt; and there should be no reporting to Revenue of interest or dividends on credit union savings. The Revenue and Finance members of the group did not support these recommendations.

At Report Stage of the Finance Bill, I indicated that there are a number of issues which must be considered. Issues such as tax equity and Exchequer cost, particularly if tax breaks given to credit union savers had to be extended to savers in other financial institutions. In addition, there is also an EU dimension which must be considered in full. The corporation tax exemption for credit union, which I renewed last year, has been questioned as a State aid in Brussels. I understand that one consideration apparently influencing the Commission in taking a benign attitude to this exemption is that the members themselves are liable to income tax on the dividends. However, this benign attitude might change if we were to exempt dividends from income tax.

The different views expressed in the working group reflect the complexity of this issue and the need to examine carefully all the implications before coming forward with firm proposals.

I am still considering this report and as of yet have no proposals to amend the law in this regard.