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

During the Dáil Committee Stage of the Finance Bill 2017, the Minister for Finance, Deputy Donohoe, committed to providing a report to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach on the possible consequences of changes to the treatment of corporation tax loss relief in respect of banks. This report was sent on 31 August 2018 and was also published on the Department of Finance's website. This report discusses 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, for the wider banking sector or for the corporate sector as a whole. The report examines the possible effect of such a restriction on consumers, with the probability that an increased cost base for the banks would be passed on in the form of higher fees and higher interest rates on mortgages and business and personal loans or lower deposit interest rates, or both. It also noted potential negative effects on the valuation of the State’s bank shareholdings, on capital levels in the banks and the possible resulting regulatory impacts, the potential state aid implications and effects on competition within the banking sector in Ireland. The report further noted that loss relief is a standard feature of corporate tax regimes worldwide. Loss relief recognises the fact that business cycles run over a longer period than just a single year and that it would be inequitable to tax profits in one year and not allow relief for losses incurred in another.

In relation to the detail of the Senators’ proposed amendment, the report estimated that a 50% restriction on the offset of losses against the three Irish pillar banks in 2017 would have yielded €117 million. However, these three banks contributed €101 million in 2017 through the bank levy. Furthermore, Irish banks currently pay Irish corporation tax, as the tax losses do not shelter all sources of income. According to the most up-to-date figures available, Bank of Ireland paid corporation tax of €21 million in 2018 in addition to a bank levy of €29 million, while AIB paid €25 million in corporation tax and a bank levy of €49 million. In total in 2018, Bank of Ireland, AIB and Permanent TSB combined paid approximately €147 million to the Exchequer, of which €101 million was from the bank levy and €46 million was in corporation tax. I also note that the Minister committed to provide the finance committee with updates on the figures in the published report, to reflect the additional year of data now available. I commit to also provide Senators with a copy of that updated report for their information.

Given the level of analysis that has been so recently completed and the commitment made to provide an update on the figures in the report, I do not accept the Senators’ recommendation.