Minister to change dividend withholding tax

The Minister for Finance, Mr McCreevy, has sought to reassure the financial services industry that amendments are to be made to a controversial Dividend Withholding Tax.

Speaking at the annual Financial Services Industry Association (FSIA) lunch yesterday, the Minister identified the issue as one which had yet to be resolved by his department and referred to upcoming modifications in the year-old tax.

The 1999 Finance Act introduced the tax at the standard rate of income tax on dividends paid by Irish companies to certain shareholders. The yield from it in the current tax year to April 5th 2000 is expected to be £50 million (€63 million), well above the Budget 1999 estimate of £15 million in a full year.

However, according to the industry, the work involved in collecting the tax places an onerous burden on the shareholders' registration departments of the banks and financial institutions concerned.

The industry has lobbied strongly against what it says is the cumbersome nature of the tax for shareholders resident in the EU and tax treaty countries.

The Act required companies paying out dividends to ask these shareholders to provide certified information from tax auditors. These administrative requirements are effective from April 6th of this year, but in the meantime, Irish company registrars have been entitled to rely on addresses on the share register to establish residency.

Sources within the accounting profession have said that a simplification of the system would be welcomed for residents of EU and tax treaty countries (for instance, the introduction of a straightforward single declaration form).

Some commentators fear that the red tape attached to investing in Irish plcs may be discouraging international investors in other countries.

The modifications referred to in the preliminary list for the Finance Bill, published last Friday, are intended to reduce administrative costs, simplify certification procedures, remove overlapping and extend the range of exemptions.

Meanwhile, responding to FSIA chairman Mr Ron Bolger in relation to the introduction of a single regulatory body for the financial sector, Mr McCreevy said the matter of the single regulatory authority would be dealt with in the near future. He acknowledged that uncertainty over the issue was not a good thing for the industry.