Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

Before I start, I wish the Acting Chairman, Senator Feighan, and his good lady wife the very best of luck for the future following their nuptials of last weekend. I thank Senator Conway-Walsh. On Committee Stage in the Dáil of the Finance Bill 2017, the Minister for Finance committed to providing to the Committee on Finance, Public Expenditure and Reform, and Taoiseach a report on the possible consequences of changes to the treatment of corporate tax loss relief in respect of Irish banks. The report was provided on 31 August 2018. It discusses in some detail the implications of restricting the ability of banks to carry losses forward and of introducing a specific time limit or sunset clause on loss reliefs for banks or the corporate sector as a whole. The report examines the possible effects of such restrictions on consumers, the valuation of the banks, the State's banking investment, capital levels in the banks, possible consequential regulatory impacts, state aid implications and the potential effects on competition in the banking sector in Ireland. It sets out the potential negative effect that restricting bank losses could have on consumers due to the probability that the increased cost base of the banks would be passed on in the form of higher fees and interest rates on mortgages, business loans and personal loans and lower deposit interest rates. It is critically important to understand that the State is getting value today from the tax losses involved through its share sales. Despite the scale of the losses accumulated, Irish banks continue to pay Irish corporate tax as the relevant losses do not shelter the profits from all of their corporate entities in Ireland. The banks are also contributing to the Exchequer through the financial institutions levy which generates revenue of €150 million per year.

As Senators know, loss relief is a standard feature of corporate tax regimes internationally. Loss relief recognises the fact that business cycles run over longer periods than a single year and that it would be inequitable to tax profits in one year and not allow losses in the next. There are differences in the way loss relief operates in differing jurisdictions. While some countries impose a sunset clause or annual limit on the use of losses carried forward, many, like Ireland, do not. Ireland has stricter limitations than many other jurisdictions on the sideways offsetting of losses carried forward against income and gains from other sources. As a report of the type requested in the Senator's recommendation was provided to the Committee on Finance, Public Expenditure and Reform, and Taoiseach three months ago, I cannot accept the proposal.