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

238. To ask the Minister for Finance the estimated revenue raised by introducing a 25% or 50% cap, respectively, on corporation tax relief utilised in a single year by all banks, in first- and full-year terms; and had it been introduced in the year 2024. [40535/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

It is assumed that the Deputy is referring to corporation tax relief for losses.

The Deputy will be aware that 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 all OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned on profits 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 the banks, it is also important to acknowledge that 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 share sales are completed.

The revenue which would be raised by introducing a 25% or 50% cap on corporation tax relief utilised in a single year by all banks would be dependent on the profitability of the banks in any particular year and the amount of losses available to each individual bank.

I am advised by Revenue that the estimated amount that would have been raised in 2023 had such a restriction been in place is set out in the table below:

The Deputy will 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 (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. Among other considerations, it examined the possible effect of such a restriction on consumers, with the probability that an increased cost base for the banks would be passed on to the consumer in the form of higher fees, higher interest rates on loans, or lower deposit rates.