John Curran (Dublin Mid West, Fianna Fail)
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175. To ask the Minister for Finance his plans to review the situation in which the cap introduced in 2009 which applied to banks that had transferred assets into NAMA restricting their use of deferred tax assets to 50% of their corporation tax and was removed in 2014; and if he will make a statement on the matter. [3280/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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Loss relief for corporation tax is a long standing feature of the Irish Corporate Tax system and is a standard feature of all other OECD corporate tax systems.  It allows for losses incurred in the course of business to be accounted for when calculating a business’ tax liabilities.

Section 396C of the TCA 1997 previously restricted losses for NAMA participating institutions to offset losses against 50% of taxable profits in a given year. At the time of its introduction the Government had limited involvement in the banking system. However, by Finance Bill 2013, this measure was considered to have outlasted its initial purpose. Due to the State’s substantial holdings in the banking sector (99.8% AIB and 15% of BOI at the time) it was deemed to be acting against the State’s interests.

Section 396C was repealed to:

- Reduce the State’s role as a ‘backstop’ provider of capital.

- Improve the existing value of the State’s equity and debt investments.

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.

As I have previously stated, I do not intend to reintroduce the 50% restriction that was in place until 2014 and that the appropriate way for the banks to contribute to the economy is through the bank levy. However, at Report Stage of Finance Bill 2017, I made a commitment to provide a technical paper on the matter of bank losses to the Committee on Finance, Public Expenditure and Reform, and Taoiseach by June 2018. The commitment was made in the context of the potential impact on capital levels of the banks if changes were made to the manner in which loss relief can be offset, with the stipulation that maintaining the bank levy as the appropriate measure would remain the clear policy standpoint.