Joan Burton (Dublin West, Labour) | Oireachtas source

I understand Deputy Pearse Doherty hopes to return and speak on his amendment. This issue concerns accumulated tax losses that have built up in the tax system as a consequence of the crash, particularly in respect of banking and financial organisations and the construction industry. During the work of the Committee on Budgetary Oversight, I raised this issue with the Revenue Commissioners. They came up with figures relating to accumulated tax losses. We discussed this on Committee Stage and the Minister said tax losses were a feature of all tax systems. According to the reply I received from the Revenue Commissioners, the losses being carried forward in respect of construction for 2014 are €10.4 billion. I am not sure if the accumulated figures for 2015 are available yet. If they are available now, they are only just available. I would welcome it if the Revenue Commissioners made the 2015 figures available. In respect of finance and insurance activities, the losses carried forward and remaining at the end of 2014 are €119.3 billion. As one would expect, the losses in the banking and financial sector are significantly greater than those in construction because of the size of the crash. In further information I received from the Revenue Commissioners, they indicated that the losses used forward that included the current year for financial services were €9.480 billion, €412 million for construction and €15,330 million for all sectors. Tax forgone in financial services was €1,185 million, tax forgone in construction was €52 million and tax forgone in all sectors was €1,916 million. In the second list of tables provided by the Revenue Commissioners, tax forgone on further losses built up of €11.7 million, €95 million and €0.9 million. The figures involved are very significant.

We are allowing a build up in our system consequent on the crash - we understand the reasons for it - of very large levels of losses. We have all had a significant amount of discussion of the need to get building and construction, particularly in respect of houses, going again. Many banks and financial institutions are returning to profitability. We need investment, particularly in the housing sector with which the construction and banking sectors are hugely concerned. It seems very odd that instead of having a structure in respect of people at the upper end of income earning involving minimum effective tax rates, we are allowing all the losses carried forward to be utilised against all of the profits generated. That means that in respect of these sectors, there will be very little in terms of tax take into corporate and other relevant taxes as a consequence of the extraordinary losses carried forward. It would be fair to say that because of the level of financial and banking sector losses carried forward - the €119.3 billion - they may not pay tax for a very long time. This seems wrong because in respect of very high income individuals during the tenure of the Fianna Fáil-Green Party Government, I persuaded at different stages both Brian Cowen and Brian Lenihan of the merit of limiting the use of losses. They can still be carried forward but carried forward over a much longer period of time and tax is paid at a minimum effective rate.

This also reflects some of the debate on our corporation taxes.

The Minister correctly said that all tax systems have losses built up. People are most familiar with businesses starting up where we allow them a relatively soft three years to get on their feet and if in those years they make losses, obviously those losses are carried forward. However, the banking collapse and the construction collapse was not a case of ordinary losses; these were gigantic losses. In many cases the companies remaining are probably more valuable from a tax-loss point of view than from the likelihood of ever recommencing trading again, but those losses can be utilised.

The taxpayers and people at work took the burden following the crash. As a result we changed the tax system in order that everyone - people at work, people in different lines of business, people making capital gains - contributed more, yet we have this outlier of an enormous volume of losses. If we do not act to curtail the time over which the losses can be taken and potentially use the availability of those losses to change the behaviour of the companies, to encourage them in particular to build social and affordable housing, we will be choosing to continue to give them an extraordinary level of support at a time when they are returning to profitability and should be making a contribution in corporation and other taxes to the Exchequer. That is basically the argument.

I have no dispute with the Minister over the concept of losses. Did the losses happen? Of course, they did. We all know that; we all paid for them. However, should they now be utilised to effectively wipe out for the foreseeable future the payment and contribution to tax in terms of corporation and other related taxes of the sectors I have mentioned in particular?

The present value of gaining corporation taxes from those sectors in the context of our need to invest in affordable homes and social housing is such that it is wrong for the Minister to say to the banks and construction companies, "You have these enormous losses, just go and use them." Whenever they make profits, they just use the past losses to write off all taxable profits and can hold on for many decades without ever making a contribution to the Exchequer in corporation tax and other taxes for which they may fall liable.

The purpose of my amendment is to address that issue, to review what has been happening in this area and to submit a report to the Oireachtas.

See this speech in context