Richard Bruton (Dublin North Central, Fine Gael)
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Question 202: To ask the Minister for Finance the reason tax refunds which apply to persons whose earned income does not reach a taxable figure, do not apply to earnings on interest or dividend income, except if persons are over 65; and his views on a change in this provision. [5819/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As with most other income, interest on savings is subject to tax. With effect from 6 April 1986, DIRT has been deducted at source from interest paid or credited on accounts with licensed banks, building societies and the Post Office Savings Bank. A similar obligation has since been extended in certain circumstances to credit unions. This retention tax was introduced in the 1986 budget as the arrangements for the taxation of deposit interest up to then were regarded as unsatisfactory and gave undue advantage to some financial institutions. DIRT was subsequently regarded as satisfying an individual's full income tax liability in respect of that interest with effect from 6 April 1993.

DIRT is applied on a very wide basis and there are very few repayment situations, confined to those aged 65 and over and incapacitated persons, where there is no income tax liability. At the time the legislation was introduced, the issue of extending the ability to claim repayments of DIRT was considered and it was decided that refunds for all non-liable persons would not be allowed in the context of a final liability tax. I have no plans to extend the current DIRT repayment rules to cover such cases at present.

On dividend income, I am taking it that the Deputy is referring to dividend withholding tax. This withholding tax is available as a credit against an individual's final tax liability and may be repaid where the individual is not liable for tax.