Tax status of credit unions to be reviewed
The Government's recent decision to raise from $40,000 to $250,000 the deposit limit for credit unions raises issues about their future tax status, Revenue Minister Michael Cullen announced today.
"The change was sought by the credit unions and will allow them to increase their potential market share," Dr Cullen said.
New Zealand has 98 credit unions which together have over 180,000 members, total assets of over $400 million, and annual income of over $46 million. They are now exempt from income tax.
"The exemption dates back to 1891. No-one knows for sure why it was granted. It may have been because credit union members tended to be low-income people, who at the time were exempt from tax.
"The question now is whether this now gives them an unfair competitive advantage over other providers of financial services.
"An issues paper surveying the background to the taxation of credit unions and seeking feedback on the options for change is being prepared by officials from the Treasury, Ministry of Economic Development, and Inland Revenue Department.
"I encourage interested parties to take the opportunity to submit their views in this first stage of the review. Those making submissions have until 6 October," Dr Cullen said.
The issues paper on the tax status of credit unions is available on the following web sites:
Policy Advice Division of Inland Revenue at www.taxpolicy.ird.govt.nz
The Treasury at www.treasury.govt.nz
Ministry of Economic Development at www.med.govt.nz
Contact: David Carrigan [tax policy advisor, Dr Cullen's office] 471-9728