Michael McGrath (Cork South Central, Fianna Fail)
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Question 68: To ask the Minister for Finance, further to Parliamentary Question No. 88 of 30 June 2011, if, in view of the higher then originally expected discounts applied on NAMA loans which had the consequence of inflating the losses forward among participating banks, he has any plans to propose an amendment to the National Asset Management Agency Act 2009 to further limit the amount of relief that can be claimed by participating institutions for losses carried forward from earlier years. [19311/11]

Michael Noonan (Limerick City, Fine Gael)
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Ireland follows the international norm in that losses incurred in the course of a business are taken into account in arriving at the appropriate amount of tax that a company should bear. Under existing legislation, companies are entitled to carry forward unrelieved trading losses for offset against trading profits of the same trade in future accounting periods until the losses are fully relieved or the trade is discontinued. In this way, unused losses can be carried forward indefinitely by companies and this is the position both for institutions involved in the NAMA process and for companies generally.

However, Section 396C of the Taxes Consolidation Act has the effect of restricting the amount of taxable trading income of an institution participating in NAMA which can be reduced by losses carried forward, including losses arising from the NAMA process. This differs from the treatment applicable to companies, generally, who would be allowed to use all of their trading income arising in an accounting period to absorb losses of the same trade carried forward from previous accounting periods. The feature of note for institutions participating in NAMA is that it is the trading income against which losses may be offset that is restricted rather than the losses themselves. It will, of course, take a longer period of time for those losses to be fully used up than would be the case if the restriction did not apply.

The intention behind the section 396C restriction is that, when the participating institutions return to profitability, a minimum of 50% of their trading income will remain chargeable to tax in an accounting period notwithstanding claims for relief for losses carried forward into that period. I have no plans to increase the level of the restriction on trading income.