When the taxation of credit union members' savings was raised during the Report Stage of this year's Finance Bill, I indicated that there are a number of issues which must be considered.
These include matters 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 unions, which I renewed last year, has been questioned as a State aid in Brussels. I understand that one consideration 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 attitude might change if we were to exempt dividends from income tax.
The working group, which I set up last year to examine the taxation treatment of credit union members' savings, reported back to me last October. The independent chairman set out a number of recommendations but, the group as a whole, failed to agree. The different views expressed 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 issue and as of yet have no proposals to amend the law in this regard.