Dáil Éireann debate -
Thursday, 3 Mar 1994

Vol. 439 No. 7

Written Answers. - Bank Levy

Thomas P. Broughan

Question:

23 Mr. Broughan asked the Minister for Finance the amount of the bank levy offset against corporation tax paid by banks in 1993 to 1994; and if he will adjust the schedule to ensure that the increased profits shared by banks in 1993 are reflected in taxes paid by the banks in the year 1994 to 1995.

Minister for Finance (Mr. B. Ahern)

The information requested by the Deputy is available in relation to accounting periods falling between 1 April 1992 and 31 March 1993, in respect of which corporation tax was payable in calendar year 1993. These are the first accounting periods for which the offset against the bank levy became available. For those accounting periods, the total amount of bank levy which has been claimed by banks for offset against their corporation tax liability was £26 million. This figure, I might add, is provisional pending final confirmation by the Revenue Commissioners of the appropriate amounts which qualified for the offset.

As regards the second part of the Deputy's question, I would emphasise that the major objective of the new bank levy arrangements introduced in 1992 was to encourage them to increase the size of their corporation tax amount while at the same time guaranteeing, through the levy, an adequate receipt to the Exchequer. The new provisions for the levy provide the banking sector with an opportunity to reduce the impact of the bank levy on their annual profit results shown in their commercial accounts but to achieve this a bank must increase its corporpation tax liability above a certain threshold. This threshold, however, is not static and moves up in line with any increase in accounting profitability of the bank in question.

This threshold is based on the average corporation tax liability of the banks in the two year period ending 31 March 1991. That base is in turn indexed in line with the banks' profitability over the years since then. Thus if a bank has increased its profits since that time, its corporation tax liability must increase to a corresponding level before any possibility of levy offset arises. Only where the corporation tax liability increases above that level are the banks entitled to offset an amount of bank levy equal to the excess. In summary the increased profitability of the banks is being reflected in the 1992 arrangements for the bank and I see no reason therefore why this system should be changed.

Despite the offset mentioned above, the banks still paid tax as between corporation tax and bank levy of almost £87 million in 1993, a figure that compares favourably with the position in earlier years which clearly indicated that the tax yield from the banking sector is increasing.

Finally, I would add that I agreed with the banks in 1992 that the current levy arrangements would be reviewed after three years in the light of developments over the intervening period. On that basis I will be reassessing the levy arrangements in the context of the 1995 budget.