Why would anyone want to deposit in a non-DIRT account when they could face income tax at their marginal rate?
Revenue are to insist credit unions return the names of people who have been paid dividends (interest) on their non DIRT accounts. The current rate is 20%. Once paid, the taxpayer has no further liability. But where a person has a non-taxable account, interest earned is subject to their marginal tax rate which is between 0% and 41% depending on their income.
In 2000, in the run up to a general election, Bertie Ahern forced Charlie McCreevy to shelve his plans to tax credit union dividend payments – he did so as credit union activists threatened to run candidates in the election. The solution cobbled together permitted credit unions to continue offering non-DIRT accounts. Political captivity created a new Irish phenomena of the “credit union mattress” in which new Tiger wealth would be subsequently squirreled away from the prying eyes of the taxman.
Today it is reckoned that billions sit un-taxed in these accounts. Most of this money is not held by the over 65’s and certainly not by the under 18’s.
Of course the ILCU is now quite exercised saying credit unions will not be havens for tax evasion – well it could hardly say anything else could it? But its statement comes with a typical ILCU rider – it says that retrospective application of Irish Revenue demand for names back to 2005 wouldn’t be fair on the elderly saver and would lead to an administration nightmare.
Such a position could be seen as unwittingly providing cover for those who used credit unions to evade the taxman. Many consider it to be a regressive and poorly thought through position and one which the ILCU should immediately stand down. Whatever the outcome of this regressive stance, public expectation is that financial institutions do not provide safe havens for tax evasion. This is all the more acute as credit unions enjoy two significant state fiscal subsidies – credit union profits are tax free and DIRT free savers accounts.
As the cosy comfort of the “credit union mattress” is removed, many may well shift savings out their credit unions. Many more may be very angry indeed if their credit union did not explain the taxation implications of non-DIRT accounts.
Kaplan
Revenue are to insist credit unions return the names of people who have been paid dividends (interest) on their non DIRT accounts. The current rate is 20%. Once paid, the taxpayer has no further liability. But where a person has a non-taxable account, interest earned is subject to their marginal tax rate which is between 0% and 41% depending on their income.
In 2000, in the run up to a general election, Bertie Ahern forced Charlie McCreevy to shelve his plans to tax credit union dividend payments – he did so as credit union activists threatened to run candidates in the election. The solution cobbled together permitted credit unions to continue offering non-DIRT accounts. Political captivity created a new Irish phenomena of the “credit union mattress” in which new Tiger wealth would be subsequently squirreled away from the prying eyes of the taxman.
Today it is reckoned that billions sit un-taxed in these accounts. Most of this money is not held by the over 65’s and certainly not by the under 18’s.
Of course the ILCU is now quite exercised saying credit unions will not be havens for tax evasion – well it could hardly say anything else could it? But its statement comes with a typical ILCU rider – it says that retrospective application of Irish Revenue demand for names back to 2005 wouldn’t be fair on the elderly saver and would lead to an administration nightmare.
Such a position could be seen as unwittingly providing cover for those who used credit unions to evade the taxman. Many consider it to be a regressive and poorly thought through position and one which the ILCU should immediately stand down. Whatever the outcome of this regressive stance, public expectation is that financial institutions do not provide safe havens for tax evasion. This is all the more acute as credit unions enjoy two significant state fiscal subsidies – credit union profits are tax free and DIRT free savers accounts.
As the cosy comfort of the “credit union mattress” is removed, many may well shift savings out their credit unions. Many more may be very angry indeed if their credit union did not explain the taxation implications of non-DIRT accounts.
Kaplan