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

Corporation tax loss relief is provided for by section 396 of the Taxes Consolidation Act 1997. Loss relief for corporation tax is a long-standing feature of the Irish corporate tax system. It allows for losses incurred in the course of business to be accounted for when calculating a business's tax liabilities. This mechanism is a standard feature of corporation tax systems in all OECD countries.

Section 396C of the Taxes Consolidation Act 1997 previously restricted losses for NAMA-participating institutions to offset losses against 50% of taxable profits in a given year. At the time of the Act's introduction the Government had limited involvement in the banking system. However, by the Finance Bill 2013 this measure was considered to have outlasted its initial purpose. Due to the State's substantial holdings in the banking sector - 99.8% of AIB and 15% of BOI at the time - it was deemed to be acting against the State's interests.

Section 396C was repealed to reduce the State's role as a "backstop" provider of capital and to protect the existing value of the State's equity and debt investments.

With the removal of Section 396C, AIB and Bank of Ireland were restored to the same position as other Irish corporates, including other Irish banks, which effectively levelled the playing field.

As I have previously stated, I do not intend to change how tax losses are taxed for Irish banks, including those bailed out by the State, as I believe there could be consequences that would make it difficult for me to fulfil other objectives in respect of the Irish banking system.

On Committee Stage of the Finance Act 2017 I agreed that my officials would produce a report on the effect on limiting tax reliefs on losses carried forward for banks. It is envisaged that this report will be submitted to the committee in June of this year.

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