Brian O'Shea (Waterford, Labour)
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Question 14: To ask the Minister for Finance if he will comment on the fact that some €1.59 billion has been refunded in respect of 2008 preliminary tax and losses attributed back to 2007; the way this compares to tax refunds in previous years; the steps he has taken to ensure that financial institutions and property companies will not be able to avail of significant tax refunds arising from their participation in National Asset Management Agency; and if he will make a statement on the matter. [44869/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Figures providing a breakdown of refunds of Income Tax (non-PAYE) and Corporation Tax in 2007 and 2008 are set out in the following tables.

Refunds of tax associated with losses are not separately identifiable from refunds made for other reasons such as people making claims for medical expenses, etc.

Income Tax – refunds in 2007 and 2008.

Corporation Tax – refunds in 2007 and 2008.

Year Total refund amounts

€m

The question of possible refunds of tax to participating institutions as a result of the transfer of assets to NAMA does not yet arise since no such transfers have yet taken place. As the Deputy will appreciate, it will not be possible to quantify the losses until the transfers actually take place.

The Irish tax system provides that where a company incurs losses in the course of its trade, those losses may be carried back and used against the profits, if any, of the immediately preceding accounting period of the same length (an accounting period cannot exceed one year). For example, if as a result of transfers of bank assets in the year to 31 December 2009, a participating institution makes an overall loss in that year then it would be entitled to set off that loss against profits, if any, arising to the institution in the year to 31 December 2008 only. Where there were no profits in 2008 against which to set the loss carried back, no refund would arise since no tax would have been chargeable. In such cases, the losses may be carried forward.

For the future, I have included in the National Asset Management Agency Bill 2009 a provision to limit the amount of relief that can be claimed by participating institutions for losses carried forward from earlier years. It will limit the set-off of carried-forward losses against trading income of a participating institution and all other participating institutions in the same group, to no more than 50 per cent of that income. The net effect of the provision is that the income of a group of participating institutions cannot be reduced by more than 50% by set-off of losses carried forward. A minimum of 50% of trading income of any year will continue to be chargeable notwithstanding claims for relief for losses carried forward into that year.