Vol. 436 No. 1
6 Mr. Rabbitte asked the Minister for Finance the total amount paid by the banks in bank levies and corporation tax for 1992; the estimated amount for 1993; if these are adequate in view of the record profits now being made by the main banking groups; and if he will make a statement on the matter.
The total amount of Irish corporation tax and bank levy paid by the commercial banks in 1992 was £75.5 million. This does not include receipts from the section 84 levy in respect of which the banks act as collection agents only.
Apart from the yield of £36 million from the bank levy, it is not possible to supply corresponding figures for 1993 at this time. It should also be remembered that the banks pay significant amounts of overseas tax as well as Irish corporation tax.
The 1992 tax and levy figures compare favourably with the position in recent years and indicate that the tax yield from the banking sector is increasing.
The Deputy will be aware that, apart from the impact of the profitability of the banks themselves on the tax yield, a whole series of measures designed to increase the yield have been introduced in recent years. Of particular significance in this regard have been: the restrictions which have been placed on section 84 lending which have greatly reduced the volume and scope of such lending and thereby resulted in an increased tax yield from the banks, the abolition of most accelerated capital allowances and their replacement with standard wear and tear allowances of 15 per cent per annum — this has greatly reduced the tax loss arising from the use of such allowances by financial institutions generally, both as regards their own investment and in their leasing activities; the abolition of the special corporation tax rate of 35 per cent which applied to the profits of mortgage business undertaken by the banks and building societies.
The bank levy, which was first introduced in 1981 as a direct response to the low level of corporation tax paid by the banks, was increased in 1988 from £25 million to £36 million and has remained at that level since that time. As the Deputy knows, new arrangements were introduced for the bank levy last year, which will continue in force up to next year. These new arrangements protect the position of the Exchequer while assisting the competitive position of the Irish banks in the post-1992 EC banking market by giving them an incentive to pay extra corporation tax so as to offset their levy payments. These new arrangements involve a minimum corporation tax threshold which is indexed in line with the increase in a bank's profitability since the threshold date.
All in all, therefore, I am satisfied that over time an increasing proportion of bank profits have, and are, being exposed to tax.
Does the Minister accept that a substantial proportion of the amount raised by way of the levy on profits is paid by Irish business? Is he satisfied that the Irish consumer is being ripped off to such an extent that it takes on the proportions of a national scandal having regard to the charges imposed by the banks? Does the Minister propose to do anything about this?
Unfortunately, the powers in relation to charges are contained in the 1989 Central Bank Act but I have availed of every opportunity to raise this issue, in particular the A, AA and AAA categories, with bankers. I can assure the Deputy that I have had meetings with the banks directly involved and also with the Central Bank. I also had an opportunity recently to raise all these issues at the annual dinner of the Bankers' Institute. Since we raised those issues the banks have become quite competitive, particularly in regard to the AA category which includes small businesses and farmers, and that has been very helpful.
Will the Minister express clearly to the House his displeasure at the banks' imposing a regime of charges that are crucifying the consumer? Is he satisfied that there is adequate competition in the banking sector? In addition, will he indicate if he is bringing forward the third force in banking as promised in the Programme for a Partnership Government?
I see from the Sunday papers that that is sold to Australia.
Most of the controversy in relation to charges recently has related to one bank, so it is unfair to generalise. In the last few years there has not been competition, and this has not all been the fault of the banks involved. Recently, in an eight-day period, one bank dropped interest rates by 0.25 per cent in the AA category. Two days later another bank dropped interest rates by 0.5 per cent. Two days later there was another drop of 0.75 per cent, followed by a further drop of 1 per cent over the weekend. Subsequently another bank dropped interest rates by a further 0.25 per cent. This certainly indicates that competition has at last commenced. As to whether I am totally satisfied that there is enough competition, the answer is no.
The Minister referred to one bank. I do not think the displeasure among consumers relates to one bank.
The present controversy relates to charges, not just the charges of one bank.
What proportion of the extraordinary profits returned recently by one bank for six months was due to speculation against the IR£ at the beginning of this year?
That is a special question, worthy of a separate question. Let us come to deal with other questions.
