Vol. 502 No. 6
185 Mr. Perry asked the Minister for Finance the plans, if any, he has to allow a tax exemption on the return from a credit union share as requested by the Irish League of Credit Unions; the further plans, if any, he has to adopt the proposals of the working group as outlined by the league; and if he will make a statement on the matter. [8714/99]
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.
186 Mr. Perry asked the Minister for Finance if his attention has been drawn to the fact that there are no tax free savings in credit unions and members must pay dividends and interest at their marginal tax rate of 24 per cent or 46 per cent having first declared to the inspector of taxes the amount of such dividend or interest earned; his views on this system in view of the fact that credit union members are liable to tax at a higher rate than applies to similar savings in banks and building societies; and if he will make a statement on the matter. [8715/99]
The present tax treatment of credit unions is as follows: the surplus income or profits of credit unions are exempt from corporation tax, an exemption that I continued in the Finance Act, 1998; dividends and interest on credit union shares or deposits are liable to tax at the members or depositor's marginal income tax rate which can be zero, 24 per cent or 46 per cent; there is no notification by credit unions to Revenue of dividends or interest paid to their members. However, the individual credit union member must report the income to Revenue as has always been the position under income tax law.
Last year, I established a working group to examine the taxation treatment of credit union members' savings. This group 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.
