Vol. 403 No. 8
18 Proinsias De Rossa asked the Minister for Finance if, in view of the comments he made at a recent bankers' conference in Cork to the effect that the tax yield from Ireland's financial institutions was still too low, he will outline the measures he intends to take to ensure a more substantial tax contribution, especially from the banks, and if he will make a statement on the matter.
A series of important measures have been taken in the last few years which have now begun to result in an increased tax yield from the financial institutions. This yield will continue to grow accordingly as these measures take full effect. The measures are as follows.
Accelerated capital allowances are being progressively eliminated; from 100 per cent for capital investment made prior to April 1988, these allowances now stand at 50 per cent and will be terminated by April 1992. This will reduce the tax loss arising from the use of such allowances by the financial institutions, both as regards their own investment and in their leasing activities.
Restrictions have been placed on section 84 lending. First, a levy on such lending was introduced in 1986. Secondly, an overall volume restriction on domestic-sourced section 84 loans was imposed in 1989, with no new lenders permitted, and no new such loans were allowed for Shannon service companies from 12 April 1989. In 1990 a further volume restriction was imposed, limiting each lender to 75 per cent of their loan volume as at 12 April 1989. These measures have resulted in an increased tax yield from this area, which will rise over the next few years as compared to what otherwise would have been the case.
The corporation tax rate of 35 per cent which applied to profits of mortgage business undertaken by the banks and building societies was raised in April 1989 to the standard rate.
In 1986 an important restriction was imposed on the way in which life assurance companies could set off their expenses as between their different classes of business. The levy on premiums for life assurance linked investments was increased from 1.7 per cent to 3 per cent in 1987. The bank levy which was introduced in 1981 as a direct response to the low level of corporation tax paid by the banks was increased from a level of £25 million in 1988 to its current level of £36 million.
The operation of all these measures is constantly being monitored and kept under review. Any further measures in relation to changes in taxation of the financial institutions are a budgetary matter, on which I do not propose to comment at this stage.
Would the Minister indicate how he defines growth in a return from the banks? Is it a percentage of their declared profits or is it the actual figure in terms of millions of pounds paid by them from one year to another? The Minister is aware that the declared tax paid by the AIB is 32 per cent of profits while for the Bank of Ireland the figure is 26 per cent, which is less than the rate paid by many PAYE workers. Can the Minister indicate in what way he measures the expected growth? Can he tell us also what other measures he proposes to take to increase the growth rate in whatever way he measures it?
I do not propose to get into the budgetary matters here. The Deputy will appreciate that as a result of actions I have taken it will be some time before the increases come through. Corporation tax paid by banks, life and nonlife assurance companies and building societies for the yearly accounting period ending between the end of September 1988 and the end of December 1989 is estimated at £75 million to date. This is an increase of about 20 per cent over the amount paid in respect of corresponding accounting periods in the previous year. Account must also be taken of the amounts raised by the bank levy, section 84 levy, life assurance levy; in all, the yield from these in 1989 came to over £19 million. There will be an increase again this year because as accelerated allowances decrease and section 84 loans are less available the amounts available for write-off of tax are much less and, consequently, they filter through the system over a period of a couple of years.
The Minister still did not answer the question as to how he measures the growth. He indicated there had been an increase of 20 per cent over what was paid on previous occasions. In what way does that relate to the actual profit made by these institutions? What steps are taken to examine the question of deferred taxation by the banks, which I believe is substantial? Does he have any figures on the amount of deferred taxation?
How it is done and whether I have any arrangements in relation to the issue are separate questions. The Deputy will have to put down a separate question.
The time has come to deal with other questions. A brief question, Deputy De Rossa, please.
The Minister clearly misunderstands my question. What are the figures in relation to the amount of deferred taxation?
I do not have them. It is a separate question. Put down a question and I will get the information for the Deputy.
The question I am asking relates to the taxation of banks.
I do not have the information. It is a separate question. Put down a question and I will be happy to get the information for the Deputy.
The time for dealing with questions is exhausted.
Will the Minister provide me with the information?
The information available is probably not what the Deputy is looking for. I am sure the Deputy has people in the right places who have probably given it to him already.
In any event, will the Minister provide the information?
Yes, whatever is available. Whatever is available to me will be available to the Deputy.
Thank you very much. Perhaps the Minister will let me have it before the House rises.
I am calling Question No. 19.
Clearly, it is a sensitive matter.
(Limerick East): Will Deputy De Rossa make that reciprocal?
Probably he has more information than I have.
