Pearse Doherty (Donegal, Sinn Fein)
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2. To ask the Minister for Finance if a 25% cap on losses that can be carried forward by banks will be introduced in combination with a ten-year time limit on the use of these allowances; and if he will make a statement on the matter. [10012/19]

Pearse Doherty (Donegal, Sinn Fein)
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The offer the Minister made regarding the Report Stage amendments to the Brexit Bill is very welcome.

On the question I have before him, he will be aware that this is the annual reporting season for the financial institutions. We have heard some of those reports already with respect to mega profits being made on the back of very high interest rates and repossessions taking place within the banks, but we still have the scandal of banks not paying any corporation tax on their profits. I have put forward a proposal where we would cap the losses at 25% and that proposal stands. Is it time for the Government to consider a proposal of that nature?

Paschal Donohoe (Dublin Central, Fine Gael)
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Corporation tax loss relief is provided for under section 396 of the Taxes Consolidation Act 1997. It allows for losses incurred in the course of business to be accounted for when calculating the tax liability of a business. Loss relief is a long-standing feature of the Irish corporate tax system and is a standard feature of corporation tax systems in all OECD countries. It is available to, and claimed by, businesses in all sectors, not just those in the banking sector. In view of state aid rules, it is likely that any loss restriction would have to be broad-based, affecting all corporate entities, and this could have significant consequences across the economy.

As I have stated previously, I do not intend to change how tax losses are currently treated for Irish banks, either by means of a targeted restriction or a wider measure, because I am of the view that doing so would give rise to significant and negative consequences for the customer and for the Exchequer.

There would be an immediate and consequential negative impact as a result of the increased cost base for the banks being passed on to consumers in the form of higher fees, higher interest rates on mortgages and business and personal loans and-or lower deposit interest rates.

Among other consequences for the Exchequer, there would be a material negative impact on the valuation of the State's investments from any change in tax treatment of accumulated losses where the banks are concerned. It is critically important to understand that the State is getting value from those tax losses today through share sales. If we were to change our policy with respect to tax losses now, the State's credibility with investors would be damaged as it sold shares in the AIB initial public offering, IPO, on the basis that there were no plans to change this policy. It is worth noting that the banks are contributing to the Exchequer through the financial institutions levy introduced in 2013. In budget 2016, the payment of this levy was extended to 2021. It is anticipated that the bank levy could raise €750 million over five years.

Pearse Doherty (Donegal, Sinn Fein)
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Listening to the Minister, one would swear these banks were broke and that any tax they might have to pay, just as every business out there pays its taxes, they would have to absorb through higher interest rates and charges on the public just to keep their heads above water. The reality is very different. Bank of Ireland has reported its profits for last year. Its underlying profits amounted to €935 million and it is not paying a penny of corporation tax in this State. Permanent TSB told us that on the back of the sale of performing loans to vulture funds, it made a profit of €94 million last year. Tomorrow we will know the profits that have been made by AIB. We know that its profits for the first six months of this year amounted to €762 million, so total profit is likely to be in the same region as it was last year at €1.5 billion. These are some of the most profitable banks in Europe. Combined, these three banks have made approximately €2.5 billion in profit but have not paid a penny in corporation tax. There has been a change in the law in the past. The Minister changed the law to reduce the restriction and reduce the cap. Is it not time to ask the banks to do what every other business does and pay their taxes in a fair and timely manner?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are treating banks the way we treat every other business. Every other business has the ability to treat its losses in a certain way. As the Deputy will be aware, the way losses are treated on the balance sheets of banks has an impact on banks' value and ability to perform. I did not indicate at any point that our banks are unprofitable. In many cases, they have returned to profitability. I want to use that higher level of profitability to create a means by which over time we can get back from these banks the money that was invested to save them. The Deputy was very critical of that decision at the time. As such, I would have thought he would support a strategy that allows us to get that money back. Changing this policy at this point would lose the money we have invested in these banks on behalf of the taxpayer. Crucially, even with the higher levels of profitability, it would result in lower lending and higher interest rates for customers, outcomes I want to avoid. If those things were to happen, the Deputy would also be critical.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister's own research rubbishes what he says. It shows that the loss in the value of the three banks would amount to €480 million. Within 15 months my proposed cap of 25% would exceed the loss that would accrue. No other business that has incurred loss, whether it is the local hairdresser, the publican up the road or the local supermarket, was bailed out for its losses by the State. That is the what makes the banks different. We made up for their losses by transferring Exchequer money to them and now they want to benefit from the tax code. The reality is that we are an outlier in Europe and in the OECD, in allowing for 100% loss relief over an unlimited time. It is unjustifiable for the Minister to say it is okay for AIB not to pay a penny of corporation tax for 20 years. He again parrots the line from the industry that anything that changes the rules in this way will result in higher interest rates.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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The Deputy's time is up.

Pearse Doherty (Donegal, Sinn Fein)
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I will make a final point. Bank of Ireland has signalled that it will increase interest rates for mortgages. I reported that bank to the Competition and Consumer Protection Commission, CCPC, for that because I believe it is the start of price signalling within the market. This approach to taxing them falls very short of the need to raise revenue.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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The House has an order that determines the time available. Deputy Doherty consistently disregards the order. Will he please adhere to the time that has been laid down? If the time is not adequate for him, he should get his people to change it.

Pearse Doherty (Donegal, Sinn Fein)
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I appreciate that.

Paschal Donohoe (Dublin Central, Fine Gael)
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The research I published, which the Deputy referred to, also stated that the way taxes and losses are treated on the balance sheets of banks has a significant effect on those balance sheets. If we were to change that treatment, there would be consequences for the ability of the banks to meet the needs of customers in a more cost-effective way. The Deputy knows, of course, what would happen if we changed the tax treatment of banks' losses at this point. First, we would single them out from all other companies within the economy, which would have immediate consequences. Second, our ability to get back the money the taxpayer invested in these banks would be impaired. Again and again the Deputy has stood up and criticised the fact that these banks were supported by the taxpayer. I understand why. I would have thought he would be supportive of my efforts to get that money back.