Patrick Costello (Dublin South Central, Green Party)
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188.To ask the Minister for Finance for his view on the potential to introduce a windfall tax on Irish banks given their increasing profit margin; and if he will make a statement on the matter. [25167/24]

Michael McGrath (Cork South Central, Fianna Fail)
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As a small open economy, connected to Europe, the US and the wider world, Ireland is committed to a competitive, transparent and stable corporation tax system. As the Deputy will be aware, the trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%, and under the Pillar Two agreement the effective rate has increased to 15% for in-scope companies.

Imposing additional taxes on certain sectors would involve increased complexity and could change the attractiveness of Ireland's corporate tax regime. While it is possible that imposing such taxes could lead to theoretical gains, there is a risk of such taxes leading to lower levels of economic activity and to companies passing the additional tax burden onto their suppliers or consumers.

In relation to introducing a windfall tax on banks, there are a number factors would need to be considered, such as the potential for negative impacts on bank customers and employees, and further reduced appetite for competition in a sector that has recently seen the departure of two significant banks.

Introducing a windfall tax could have an impact on the capital position of the banks, and consequently on their market value, resulting in an immediate reduction in value of the State’s remaining shareholdings. It would also have the potential to damage the State’s credibility in the international markets, and this could have negative consequences for values achieved in future share sales.

From a consumer perspective, increased costs and reduced competitiveness in the banks as a result of a windfall tax could potentially lead to pricing increases or reduced services. This could have a negative impact on consumers – for example through increased fees, increased mortgage interest rates, or reduced lending to Irish businesses – or on employment in the Irish banks if cost-cutting measures are required.

The Deputy may be aware that a banking sector specific measure has been in place since 2014, in the form of the bank levy. Finance (No.2) Act 2023 provided for a revised form of the bank levy based on the end-2022 eligible deposits of four named institutions that received State assistance during the banking crisis (AIB, EBS, PTSB, and Bank of Ireland). The 2024 target revenue of €200 million stipulated in Finance (No.2) Act 2023 is more than twice the €87 million raised in 2022 and 2023 by the previous form of the levy, and one third more than the circa €150 million raised under it each year between 2014 and 2021.

The operation, extent and target revenue of the bank levy will be further considered in advance of Budget 2025.