I move recommendation No. 10:
In page 48, between lines 12 and 13, to insert the following:
“Report on Deferred Tax Assets and Bank Losses
13. The Minister shall, within 8 weeks of the passing of this Act, produce a report on the use by banks and other companies in Ireland of the Deferred Tax Asset schemes in respect of past losses, to include—
(a) consideration of the relevance of principles in section 11 of this Act in respect of the use by banks and other companies in Ireland of Deferred Tax Assets, and
(b) options for the banks in Ireland of the limitation of use by certain companies or banks of the Deferred Tax Asset Scheme or the limitation of the applicability of Deferred Tax Assets to a maximum of 50 per cent of profits in any year.”.
These are issues we discussed very recently. While I am delighted to discuss them with the Minister of State, I would just note a small but important point, which is the Minister, Deputy Donohoe, was not always wonderful at coming to the Seanad in the previous Oireachtas and I hope, even though I am very happy to be speaking to the Minister of State, that the Minister, Deputy Donohoe, will perhaps come more often to the Seanad and debate with us in person.
This issue is very much within the remit of the Minister of State because it relates to banking and the finance sector, which I know is his focus, but it has a wider concern because according to the estimates of the Comptroller and Auditor General, deferred tax assets cost €29 billion overall to the State with €12 billion of loss of finances to the State from the financial and insurance sector. This is a very large amount. It is the future estimates from the Comptroller and Auditor General.
I was looking at the calculations in the section on relevant and non-relevant trading losses and the provisions whereby persons are compensated in respect of losses they make in the course of their business. It is another element to think about. In this section we have an attempt to strike a balance between 50% relevant and 50% non-relevant. There is a request that companies maintain records to determine whether such losses are computed in a reasonable manner. The section deals with the question of what is an appropriate level of loss to be compensated by the State through the write-off of tax liability. I suggest that in the case of the banks, where there has been a massive State injection of funding and support in terms of the bank guarantee and underwriting, it is certainly not appropriate that they use the deferred tax asset scheme to avoid paying taxes for, we are told, at least another decade if it is proceeded with. The figures were that Permanent TSB would not pay any tax until 2038 and AIB might not pay any tax until 2037. I do not think as we face into another crisis that we can afford to have these banks not pay tax for more than a decade.
The calculations in the section use a figure of 50%. A very useful compromise between what I would prefer, which is a complete end to the use of the deferred tax asset scheme by banks, and the current situation, whereby 100% of profits can be written off by banks using the deferred tax asset scheme, is the compromise the then Minister, Brian Lenihan, had between 2009 and 2014. He made the quite reasonable provision that only 50% of profits could be written off using the scheme. It was a very reasonable provision whereby if the bank had losses it did not apply but if a bank made a profit it could afford to have at least 50% of it available to the State for taxation in a normal fashion and contribute to the functioning of the State, which so kindly bailed it out in its time of need.
I will not rehash this. I know the Minister of State is aware of these issues and will bring them into the discussion on the budget. I will simply say it again that money not collected in taxation is money lost to the Exchequer. It is money that is not available for public expenditure. It is not simply an absence of revenue, it is money forgone and expenditure. This is a big decision. Even if we love the deferred tax asset scheme we need to ask whether it is the best use of money that gives the best return. Much as with the decisions we heard about VAT, we are making a decision to reduce VAT because we anticipate it will make a real difference in terms of stimulus of the economy. What is the benefit we will have from giving a massive tax relief of 100% of past losses to banks? This is quite a new and unusual measure. It was introduced in 2014. Ideally, we should end the scheme or revert to the position from 2009 to 2014, which placed a 50% limitation. I hope the Minister of State will consider a report on this. I will keep suggesting reports. Perhaps the Minister of State will come up with a report himself. It is an issue we really need to think about before the budget.