Michael McGrath (Cork South Central, Fianna Fail)
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53. To ask the Minister for Finance the legacy losses outstanding from a tax perspective in banks (details supplied); the length of time into the future these losses can be carried forward to reduce tax; if an analysis has been carried out on the effect on the banks of restricting the losses that can be brought forward; and if he will make a statement on the matter. [42308/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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S396c was a provision introduced by the NAMA Act 2009 which limited the amount of trading losses incurred by a NAMA participating bank that could be set-off against future trading profits. The set-off was limited to 50% of the profit in any given year. It did not disallow any tax losses from being utilised but instead lengthened the period over which they could be used. Section 396C was introduced as a form of claw-back for the taxpayer.

However, with the introduction of the new capital rules on 1 January 2014 under CRD IV and the State having acquired ownership positions in the banks, it no longer served its original purpose and accordingly, in the Finance Act 2014, the Minister for Finance deemed it appropriate to remove the provision. The removal of Section 396C put the covered banks in the same position as other corporates including other banks operating in Ireland. Indeed I would highlight for the Deputy that the provision which allows the carry-forward of tax losses for set-off against future trading profits is available not only for banks but for all Irish corporates. This is a standard tax policy internationally.

In relation to the impact on the banks of changing the treatment losses that can be brought forward, I can confirm that an analysis was carried out in late 2013 as part of the preparations for the Finance Bill 2014 when S396c of the Taxes Consolidation Act 1997 was repealed.

To recognise the part that the banks played in the financial crisis, in 2013, the Government also decided that the banking sector should make an annual contribution of approximately €150 million to the Exchequer for the period from 2014 to 2016. In Budget 2016, the payment of this levy was extended until 2021. The bank levy is expected to raise €750 million over the five years.

My Department requested that each of the banks to respond to the Deputy's query and received the following information.

Bank of Ireland:

"In 2016, the Group paid taxes of €263m to the Irish State and collected taxes of €858m on behalf of the Irish State. In the first six months of 2017, the Group paid taxes of €96m to the Irish State and collected taxes of €455m on behalf of the Irish State. Note 19 on page 81 of the published Interim Report for the six months ended 30 June 2017 contains the Group’s disclosures on the deferred tax asset that has been recognised in respect of historical trading losses. At 30 June 2017, deferred tax assets include an amount of €1,251 million in respect of tax losses which are available to relieve future profits from tax. Of these losses, approximately €1.1 billion relates to Irish tax losses and €0.1 billion relates to UK tax losses. It is currently projected that the deferred tax asset in respect of tax losses will be recovered in full by the end of 2038.

"The deferred tax assets have been recognised on the basis that it is probable the tax losses will be recovered as the Directors are satisfied that it is probable that the Group will have sufficient future taxable profits against which the deferred tax assets can be utilised. Under current Irish and UK tax legislation there is no time restriction on the utilisation of trading losses."

AIB:

"Information in relation to AIB’s Deferred Tax Asset are contained on Pages 257-259 and Pages 296–298 of the 2016 Annual Financial Report and Page 115 of the 2017 Half-Yearly Financial Report. At 31 December 2016, AIB Group recognised deferred tax assets of €2,928 million arising from unused Irish tax losses. No deferred tax assets were recognised in respect of other unused Irish tax losses of €122 million.

"Under Irish tax legislation, there is no limit on the period of time for which any company can carry forward losses incurred in its trade for offset against future profits for the same trade.

"Notwithstanding that AIB is carrying forward large amounts of trade tax losses, it also pays significant amounts of tax in Ireland such as the bank levy, corporation tax on capital gains and on non-trading income, irrecoverable VAT on purchases, and employer’s PRSI. In addition, it remits to the Revenue taxes collected from others including PAYE, USC and PRSI relating to its c. 10,000 employees."

PTSB:

"As noted in PTSB’s 2016 Annual Report, the PTSB Group recognised a deferred tax asset on tax losses carried forward of €373m at 31 December 2016. This equates to tax losses of c. €2.98bn. The Group has estimated that it will take c. 22 years for the tax losses to be utilised."