Pearse Doherty (Donegal, Sinn Fein)
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131. To ask the Minister for Finance if he has given consideration to introducing legislation which would prohibit the use of legacy losses against profits beyond 31 December 2017 in view of the fact that banks have accumulated losses from the financial crisis of some €34 billion. [50668/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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Corporation Tax Loss Relief is provided for by Section 396 of the Taxes Consolidation Act (TCA) 1997.  Loss relief for corporation tax is a long standing feature of the Irish Corporate Tax system. It allows for losses incurred in the course of business to be accounted for when calculating a business’ tax liabilities. This mechanism is a standard feature of Corporation Tax systems in all OECD countries. 

There would be a material negative impact on the valuation of the States investments from any change in tax treatment of accumulated losses where the banks are concerned. It is critically important to understand that the State is actually getting value today from these deferred tax assets through our share sales. 

In the case of the AIB, the bank’s deferred tax asset of €2.8 billion is in the shareholder’s funds or book value of the bank. Earlier this year we sold 29% of the bank in the recent IPO at a valuation of close to one times the book value yielding proceeds of approximately €3.4 billion.

In fact our remaining 71% investment is currently valued at more than one times the bank’s book value so based on the current tax treatment we should continue to get hundreds of millions in proceeds linked to the deferred tax asset as we sell down our shares.

Despite the scale of losses accumulated the banks are contributing to the Exchequer through the financial institutions levy. To recognise the part that the banks played in the financial crisis, in 2013, the Government 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 2017, the payment of this levy was extended until 2021.  It was anticipated that the bank levy could be expected to raise €750 million over five years.