Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Deputies may recall that in 2018, my Department produced a detailed note for the committee on the subject of both bank losses and corporation tax losses more generally. This technical note was published online and is still available. It considered in some detail the potential implications of restricting the use of losses carried forward, or the introduction of a specific time limit or sunset clause on loss relief, for Irish banks, the wider banking sector or the corporate sector as a whole. Among other considerations, it examined the possible effect of such a restriction on consumers, with the probability an increased cost base for the banks would be passed on to the consumer in the form of higher fees, higher interest rates on loans or lower deposit rates. It also noted potential negative consequences for the valuation of the State’s banking investments and for capital levels in the banks, with possible resulting regulatory impacts. It considered potential effects on competition within the banking sector in Ireland, a factor of increasing relevance as banks have since left the market.

Taking all these factors into account, it is my view it would be detrimental to Irish consumers and taxpayers if a restriction were placed on the use of losses carried forward by the banks. As each of the three pillar banks posted losses in its 2020 financial statements as a result of the Covid-19 pandemic, it is likely limited corporation tax liabilities would have arisen for 2020 regardless of the banks’ historical losses. However, notwithstanding the trading losses forward, the Irish banks have been paying Irish corporation tax in recent years, as the tax losses forward are restricted in their use and do not shelter profits made in all their corporate entities. Given the level of analysis that has been published, I do not believe a further review on the matter is merited and I will not accept the amendment.