€40 credit card stamp duty stays

THE €40 stamp duty on credit cards is set to stay after officials in the Department of Finance blocked a review of the controversial tax that could have lead to its removal.

The department turned down a request from the Competition Authority to scrap taxes on credit and cash cards unless it could prove the taxes had no effect on competition, saying they were “a considerable source of revenue” and here to stay.

Ireland is alone in Europe in levying hefty charges on payment cards, which hit bank customers for almost €100 million every year.

Apart from the €40 payable by holders of credit cards, anyone who withdraws money from their bank using a cash card faces a minimum bill of €10 per year, while cash cards that incorporate the Laser debit facility attract a €20 annual hit.

There is no exemption from the tax for children or retired people, but a loophole in the law means it is not applied to holders of Irish credit cards who live in the North or overseas.

“The stamp duty on financial cards is now an established feature of the Irish taxation landscape,” the department said.

“It is a considerable source of revenue for the Exchequer, expected to yield approximately €93m in 2005.”

The department also defended the stamp duty charge and said that it had no effect on consumers’ ability to get good deals from their banks.

“Since the duty is levied without discrimination... there would not seem to be a persuasive case that the duty, per se, creates any competitive distortion.”

It also said that it would cost too much to review the effectiveness of the tax or explore alternative means of raising revenue.

“The department does not see a need to incur the costs of performing a general analysis,” it said.

Banks and consumer groups have repeatedly called for the tax to be abolished and claim it discourages electronic payments and attempts to reduce the level of cash in circulation.

Most European countries have attempted to switch away from cash, where possible, because it is considered an inefficient and expensive form of conducting payments.

A recent study put Ireland near the bottom of the European table for electronic payments and claimed the country’s over-reliance on cash costs the economy around €500m every year.