Government spared defeat on FG motion on credit union tax

The Government managed to avert a potentially embarrassing defeat tonight on a Dail Opposition motion on credit union tax.

The four Independent TDs who support the minority Fianna Fail-PD administration have agreed to vote for the Government amendment to the motion after they were told that the Taoiseach would meet the credit union movement on February 24th.

The Independent deputies, Ms Mildred Fox, Mr Jackie Healy-Rae, Mr Thomas Gildea and Mr Harry Blaney, were told of the meeting by the Government Chief Whip, Mr Seamus Brennan, yesterday.

The Fine Gael private members' motion called on the Government to amend the Finance Bill to make credit unions exempt from corporation tax and from reporting interest or dividends on savings to the Revenue Commissioners.

However, an amendment to the motion, tabled by the Minister for Finance, Mr McCreevy, in the Dail last night said the Government would review the credit union tax arrangements after a complaint on the matter to the European Commission is disposed of. Mr McCreevy said his Department and the Revenue Commissioners did not agree with some recommendations of the Working Group which examined the issue of taxation of returns on credit union savings.

The group recommended that the first £375 of credit union member's dividend income be exempt from tax and that any excess of dividend over £375 and up to £750 be subject to 20 per cent tax.

Mr McCreevy said his Department considered there was no case for any further changes to tax law in order to favour credit unions.

"The contribution of the credit union movement was already amply recognised by the substantial benefit that was conferred on the movement by the current exemption from corporation tax that they enjoy in respect of surplus income," he said.

Mr McCreevy said his Department considered that all interest and dividend that credit union members earned on their savings should be made subject to the DIRT arrangements in the same way as for other financial institutions which were in competition with the credit unions. The Fine Gael spokesman on finance, Mr Michael Noonan, said credit unions were looking for a fair and equitable tax system for its members.

"While the surplus income or profits of credit unions are exempt from corporation tax, dividends and interest on credit union shares or deposits are liable to tax at the members' or depositors' marginal income-tax rate."