Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

214. To ask the Minister for Finance the estimated revenue raised by introducing a 25 percent and 50 percent cap, respectively, on corporation tax loss relief utilised in a single year by NAMA participating banks and all banks, respectively. [9574/23]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

As the Deputy is aware, loss relief for corporation tax is a long-standing feature of the Irish corporate tax system and a standard feature of corporation tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another. Loss relief works by allowing a deduction for losses incurred in one accounting period against profits earned in another period.

In the case of banks in which the State holds, or previously held, an ownership stake, the value of these tax losses to the State is realised through share sales. The banks’ share prices recognise a certain value for the tax losses and, as such, the State receives value for the balance of tax losses as sell-downs complete.

The estimated revenue which could be raised by introducing a 25 percent or 50 percent cap, respectively, on corporation tax loss relief utilised in a single year, either by NAMA participating banks only or by all banks, would be dependent on the future profitability of the banks and therefore cannot accurately be forecast.

It is possible to estimate the annual yield which could have arisen from such a restriction in respect of all banks for each of the last four years for which data is available (2018 - 2021), and this is set out in the table below. Having regard to its confidentiality obligations under s851A of the Taxes Consolidation Act, 1997, Revenue is not able to provide a further breakdown of these figures between NAMA participating banks and all other banks.

All Banks

The Deputy will also be aware that, in 2018, Department of Finance officials produced a detailed technical note for the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the subject of both bank losses and corporation tax losses more generally (see www.gov.ie/en/publication/436ff7-technical-note-on-the-potential-consequences-of-changes-to-the-treat/). The technical note considered in some detail the potential implications of restricting the use of losses carried forward, or the introduction of a specific time limit or “sunset clause” on loss relief, for Irish banks, for the wider banking sector, or for the corporate sector as a whole.

Frank Feighan (Sligo-Leitrim, Fine Gael)
Link to this: Individually | In context | Oireachtas source

215. To ask the Minister for Finance if he will consider in the lifetime of this Government a pilot study or a report by a competent organisation into a possible narrow tax incentive scheme for owners/developers of town centre buildings in some rural counties incentivising them to develop same into modern commercial premises with over the shop apartments/living accommodation with an emphasis on recreating modern, high BER rating homes and commercial units (details supplied). [9580/23]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

As the Deputy may be aware, the Living City Initiative (LCI) (provided for in Finance Act 2013 and commenced on 5 May 2015) is a tax incentive aimed at the regeneration of the historic inner cities of Dublin, Cork, Galway, Kilkenny, Limerick and Waterford. The scheme provides income or corporation tax relief for qualifying expenditure incurred in refurbishing/converting qualifying buildings which are located within predetermined 'Special Regeneration Areas' (SRAs). Such developments may include both residential and commercial elements.

The LCI was reviewed as part of the Tax Strategy Group process in 2022. The review noted that the scheme is a very specific tax incentive, established in compliance with the Department of Finance’s Tax expenditure Guidelines, with the aim of encouraging businesses and home-owners back to the centre of Irish cities in order to preserve historic buildings in special regeneration areas.

In relation to the creation of new tax incentives, and the Deputy will appreciate, decisions regarding taxation measures are usually made in the context of the annual Budget and Finance Bill process and at the appropriate time. Such decisions also must have regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. The guidelines make clear that any policy proposal which involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention. In relation to this final point, there are already significant direct expenditure measures, such as the Croí Cónaithe (Towns) scheme, in place to promote residential development in urban areas.

Ireland’s past experience with tax incentives in this sector strongly suggests the need for a cautionary stance. They created distortions in the construction sector and were, with ended a over decade ago.

I will continue to work with my cabinet colleagues to ensure that any further interventions in the housing market are appropriately calibrated, represent the best use of scarce public resources and boost the supply of housing in both the public and private sectors.

I have no plans at present to commission a report along the lines suggested.