Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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440.To ask the Minister for Finance the full-year revenue that would be generated by imposing a minimum effective corporate tax rate of 15% on pre-tax gross trading profits before deductions, reliefs and allowances and assuming no behavioural change; and if he will make a statement on the matter. [33727/24]

Jack Chambers (Dublin West, Fianna Fail)
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The trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. Some of the main features of the current corporation tax regime are its simplicity and that it applies to a broad base. Changing this rate (or imposing additional levies on corporate profits) would involve increased complexity and could change the attractiveness of Ireland's corporate tax offering.

It is my understanding that the Deputy is referring to the gross trading profits of companies data which is released annually by Revenue. As with individual income taxpayers, companies can use net credits, deductions and reliefs against their profits to reduce taxable income or CT payable. For example, companies are entitled to capital allowances in respect of certain expenditure and these can be set against profits and, where a company has losses or carries forward losses from a previous accounting period (subject to conditions), these can be used to offset against its CT liability in a variety of ways. Loss-relief is 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.

In October 2021 Ireland, along with almost 140 other countries in the OECD/G20 Inclusive Framework, signed up to an historic agreement to reform the international tax framework as it applies to large corporate groups. Building on the original Base Erosion and Profit Shifting (BEPS) project, the agreement contains a two-pillar solution to address the tax challenges arising from digitalisation and globalisation. Recognising how multi-national enterprises (MNEs) across the globe now operate commercially and generate value, this significant reform will ensure that the international tax framework keeps pace with these developments in a coordinated way.

Pillar Two of the agreement will see the adoption of a global minimum effective tax rate of 15% applying to multinational companies with global revenues in excess of €750m. Ireland will retain its 12.5% corporation tax rate on trading profits for the 95% of companies in Ireland that are out of scope of the agreement.

Pillar Two has been in effect in effect in Ireland since 31 December 2023 after the EU Minimum Tax Directive was transposed. However, it is important to recognise that the minimum corporate tax rate is only one element of the OECD Two Pillar agreement. Any projected changes to corporation tax yields following implementation must also take into account Pillar One, which provides for a reallocation of certain profits to market jurisdictions.

An initial estimate of the potential cost of implementing both pillars of the OECD agreement in terms of reduced tax receipts was published in 2020 as being potentially in the region of €2 billion per annum - approximately 20% of CT revenue at that time.

Estimating the potential impact of the OECD agreement represents a considerable and on-going challenge, not least due to the fact that the negotiations are still ongoing. Given this uncertainty, the original assumption was retained in the SPU with a net loss of €2 billion from both pillars of the agreement incorporated from 2026 onwards. My Department will produce a full set of fiscal projections as part of Budget 2025 in the autumn.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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441.To ask the Minister for Finance the full-year revenue that would be generated by imposing a financial transaction tax of 0.1% on shares and securities and 0.01% on derivatives; and if he will make a statement on the matter. [33728/24]

Jack Chambers (Dublin West, Fianna Fail)
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I am taking this question to refer to the model of Financial Transactions Tax proposed by the European Commission, initially in 2011 and then revised under the EU’s enhanced cooperation procedure in February 2013. I am advised that the proposed rate on exchanges of shares was 0.1% and the proposed rate for derivative transactions was 0.01%. under those proposals.

Ireland already has a tax on financial transactions, a Stamp Duty on transactions in shares, stocks and marketable securities that currently stands at 1%. I am advised by Revenue that the yield from this tax has been in the range of c. €370 to €780 million over the last five years. This data along with other information on stamp duty receipts is available on the Revenue website. Instruments used in the financial services industry such as derivatives are generally exempt from stamp duty, unless they relate to immovable property in Ireland or shares in Irish registered companies.

Based on the data currently held by the Revenue Commissioners or my Department it is not possible to accurately estimate the yield of a Financial Transactions Tax modelled on that proposed by the EU, i.e. a tax of 0.1% on share and bond transactions and 0.01% on derivative products. An important further consideration would also need to be given as to whether the existing Stamp Duty regime could co-exist with any Financial Transactions Tax proposal which might be implemented in such a scenario.

For additional information, in relation to a possible Financial Transactions Tax as an own resource for the EU budget, leaders agreed as part of the July 2020 Multi-annual Financial Framework (MFF) agreement that a Financial Transactions Tax may form part of a package of new own resources to finance the EU budget. However, at this point, no such proposal has been put forward by the Commission. If and when this happens, I will examine any proposal based on its merits and ensure it meets the criteria of fairness and equity.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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442.To ask the Minister for Finance the full-year revenue that would be generated disallowing historic losses (losses forward) as tax deductions for banks and insurance companies; and if he will make a statement on the matter. [33729/24]

Jack Chambers (Dublin West, Fianna Fail)
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I am informed by Revenue that the annual research paper on Corporation Tax includes the most recent information in respect of losses forward and is published on its website at www.revenue.ie/en/corporate/documents/research/ct-analysis-2024.pdf

As shown in Figure 5 on page 16 of the publication, the amount of losses forward used for all companies in the financial and insurance sector is approximately €4.5 billion for 2022, with an estimated tax cost of c. €0.6 billion. It is not possible to provide a further sectoral breakdown between banks and insurance companies.

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.

It is not possible to quantify the estimated additional corporation tax revenue which could accrue from the introduction of a restriction on loss relief for banks and insurance companies, because it would require predictions about their future profitability. Changes to tax law are also generally made on a prospective basis, so any losses already in the corporation tax system would not typically be affected.

Should such a restriction be introduced, it could have knock-on implications for the cost of lending and deposits, and for the cost of insurance for consumers and businesses in Ireland. It could also be expected to decrease the value of the State’s remaining shareholdings in the banks, because tax losses forward are included as a “deferred tax asset” on a company’s balance sheet and any restriction would lead to write-downs in the value of those assets.

As regards Irish banks, it should also be noted that they do currently pay some Irish corporation tax, as the tax losses forward do not shelter profits made in all their corporate entities.

The Deputy may recall 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. This paper is available online at www.gov.ie/en/publication/436ff7-technical-note-on-the-potential-consequences-of-changes-to-the-treat/). It was further updated and re-circulated to members during the 2019 Finance Bill process.