Tax loophole saves cardholders cash

LASER cardholders will be able to wriggle out of paying the annual €20 stamp duty on their cards from next year, thanks to a loophole in new rules governing the controversial tax.

But the rules have the potential to cause chaos in banks if customers choose to take advantage of the new regime.

Revenue guidelines issued to banks earlier this month show the €20 charge will only be applied to Laser debit cards that are active on December 31 each year and that have been used at least once in the preceding 12-month period.

But there will be no charge on cards that have been used if the cardholder moves to close his or her account on or before December 30.

This leaves banks open to the prospect of huge volumes of paperwork, if thousands of customers who want to avoid the charge close their bank accounts on December 30 before re-opening them in the first working day of the new year.

The loophole will extend to holders of ordinary cash cards, who pay 10 every year to the government for the privilege of having round-the-clock access to their money.

“Under the new arrangements, cards issued on accounts that are closed during the year are not liable for stamp duty,” Revenue told banks.

“From January 1, 2006, financial institutions are required to pay stamp duty in respect of each cash card, debit card and combined card which is issued during the calendar year and is valid on December 31 of that year.”

The new rules aim to prevent the controversial charge from being levied twice on customers who move to a new bank and would otherwise have been forced to pay €40 in the year they switch.

The tax is unheard of in other countries and has been widely criticised for killing competition in the card market by discouraging card usage.

Banks have also complained that the charge has been responsible for Ireland lagging other countries in the take-up of electronic payments and continuing to rely too heavily on cash, which is considered inefficient and expensive.

An over-reliance on cash also creates security risks as it creates more opportunities for criminal gangs to target cash in transit between banks and shops.

Holders of credit cards, however, will be unable to exploit the new loophole to escape paying the annual €40 charge on their cards. Changes brought in by this year’s Finance Act mean they will continue to pay 40 if their credit card account is open at any stage during the calendar year.

But they will not be required to pay the duty twice if they switch banks. They will be forced to obtain a letter from their old bank confirming they have paid the duty and present it to their new bank when they switch to avoid being hit for €40 a second time.

The Irish Bankers’ Federation wants stamp duty on all payments cards to be scrapped. Card duties collect just €80 million each year for the Exchequer.