Dáil Éireann Debate, Thursday - 30 September 2021
167. Deputy Pearse Doherty asked the Minister for Finance the estimated additional corporation tax that could be expected to be generated in each of the years 2022 to 2025, respectively if the bailed-out banks had applied to them a 25% and 50% limit respectively on the losses that could be carried forward in a year and a five year absolute limit in which such losses could be used; and if he will make a statement on the matter. [47396/21]
View answerAs the Deputy is aware, 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 most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned 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 relation to the Deputy’s query, section 851A of the Taxes Consolidation Act, 1997 precludes Revenue officials from directly or indirectly disclosing taxpayer information to third parties unless this is specifically provided for in legislation. Therefore it is not possible to provide estimates based on such a small cohort of taxpayers. However, based on public information as to pre-COVID-19 profitability levels, a limit (be it 25% or 50%) on the Corporation Tax losses forward that can be used in one year would likely not yield significant additional tax, due to the amounts of losses forward available to the relevant companies.
A five-year restriction on the carry forward of losses could mean that these companies would no longer be able to use the historic losses that are being carried forward since the financial crisis. However, the likely additional tax yield from such a measure would depend on future profitability levels of the banks and it is not possible to estimate this accurately at present. It is further noted that, if losses forward were to be restricted in this manner, future profitability is likely to be offset to some extent by current losses arising during the pandemic.
It is important to understand that the State is actually getting value from these tax losses through share sales. In addition, despite the scale of losses accumulated, the banks contribute to the Exchequer through the financial institutions levy.
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/). It was further updated and re-circulated to members during the 2019 Finance Bill process.
