Pearse Doherty (Donegal, Sinn Fein)
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190. To ask the Minister for Finance the additional corporation tax that could be expected if the bailed out banks had applied to them a 25% limit on losses that could be carried forward in any year and a five year absolute limit in which such losses could be used; and if he will make a statement on the matter. [21946/19]

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. It allows for losses incurred in the course of business to be accounted for when calculating tax liabilities. Loss relief for corporation tax is a long standing feature of the Irish Corporate Tax system and is a standard feature of Corporation Tax systems in all OECD countries. 

Section 396C of the TCA 1997 previously restricted NAMA participating institutions to offset losses against a maximum of 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 substantial holdings that the State had, by that time, acquired in the banking sector (99.8% AIB and 15% of Bank of Ireland), the restriction 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Section 396C was repealed to reduce the State’s role as a ‘backstop’ provider of capital and to protect the existing value of the State’s equity and debt investments. With the removal of Section 396C, AIB and BOI were restored to the same position as other Irish corporates, including other Irish banks.

It is not possible to quantify the estimated additional corporation tax revenue from the measures referred to by the Deputy, as this would depend on the future profitability of the banks. Nevertheless, as I have previously stated, I do not intend to change how losses are currently treated for Irish banks, including those that were bailed out by the State, as I believe there could be consequences that would make it difficult for me to fulfill other objectives in respect of the Irish banking system.  Such a change could have knock on implications for the cost of lending and deposits for consumers and businesses in Ireland.  There would also be a material negative impact on the valuation of the State's investments from any change in tax treatment of accumulated losses where the banks are concerned.

It is important to understand that the State is actually getting value today from these deferred tax assets through our share sales.  The banks are also contributing to the Exchequer through the financial institutions levy, introduced in 2013, which generates an annual yield of approximately €150 million to the Exchequer.

In 2018 my officials produced a report for the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the potential consequences of changes to the tax treatment of losses carried forward for banks.  This report, which contains further information and more detailed consideration of the points set out above, is published on my Department’s website.

Pearse Doherty (Donegal, Sinn Fein)
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191. To ask the Minister for Finance the estimated revenue that would be raised if the remaining action points under BEPS were implemented by the end of 2019. [21945/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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In September 2018, I published Ireland’s Corporation Tax Roadmap. This roadmap takes stock of the changing international tax environment, outlines the actions Ireland has taken to date and the further actions that will be taken over the coming years to ensure that our corporation tax code is line with international best practices.  It outlines the various commitments we have made to tackle global tax avoidance, including those made in respect of the 15 actions of the OECD BEPS Action Plan but it also includes details in relation to the transposition of the EU Anti-Tax Avoidance Directives (‘ATAD’), which comprise measures that directly correspond to specific BEPS actions.

The Country-by-Country (CbC) Reporting, a tool developed by the OECD in accordance with Action 13, and the Knowledge Development Box which is in line with BEPS Action 5 were introduced in Finance Act 2015.  Ireland is also fully compliant with the exchange of information on cross border tax rulings requirements in line with BEPS Action 5.

The commitments set out in the roadmap regarding the remaining BEPS actions included commitments with regard to legislation to be introduced in Finance Act 2018.   Finance Act 2018 introduced controlled foreign company (‘CFC’) rules (BEPS Action 3) with effect from 1 January 2019. The purpose of CFC rules is to discourage the artificial diversion of income to low tax jurisdictions. As such they are not designed primarily to raise Exchequer revenue, but rather to modify taxpayer behaviour.

The final legislative steps required to allow Ireland to complete the ratification of the BEPS multilateral instrument (BEPS Actions 6, 7, and 15 and certain aspects of BEPS Actions 2 and 14) were also taken in Finance Act 2018. The changes introduced to the application of Ireland’s tax treaties are primarily anti-avoidance in nature and are aimed at stopping international tax planning strategies known as treaty shopping. It is not possible to estimate the potential impact on the Exchequer from the changes that will be made to the application of Ireland’s tax treaties.

The Corporation Tax Roadmap also enumerates further commitments to action over the next two years, including the introduction of anti-hybrid and anti-reverse hybrid rules (BEPS Action 2); an interest limitation ratio (BEPS Action 4); updating of transfer pricing rules (Actions 8-10); further work on mandatory disclosure rules (BEPS Action 12) and dispute resolution (BEPS Action 14).  It will not be possible to estimate the impact on the Exchequer of such measures, were they implemented by the end of 2019, until the process of designing the measures is significantly further advanced.

No specific direct tax measures have been recommended to date in addressing the tax challenges associated with the digital economy (BEPS Action 1). Work continues at OECD and EU level in relation to this.  As a result, it is not possible to estimate the impact on the Exchequer of BEPS Action 1.

BEPS Action 11 focuses on data collection and analysis. It does not make any specific recommendations in relation to tax changes. It relates to measurement of BEPS and suggests improvements in data collection. Therefore, it is not a revenue raising action and as a result, it is not possible to estimate the budgetary impact of BEPS Action 11.

As I outlined in the roadmap, the confluence of the OECD BEPS outcomes and the most significant US tax reform in recent history is likely to lead to significant changes in the structure of multinationals over the next number of years. The purpose of the programme of changes set out in the Roadmap is to ensure that Ireland remains on a sustainable path for growth and investment in this rapidly-changing international tax environment.