Dáil Éireann Debate, Thursday - 14 July 2022
308. Deputy Pearse Doherty asked the Minister for Finance the estimated additional yield that could be generated in 2023 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 the losses could be utilised. [39475/22]
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 OECD countries to recognise the fact that a business cycle runs over several years. Loss relief works by allowing a deduction for losses incurred in one accounting period against profits earned in another period.
I note that 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 publicly available information as to the bank’s profitability levels, a limit of 25% or 50% on the 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 banks.
A five-year absolute limit on the carry forward of losses would mean that the banks would no longer be able to use the historic losses that are being carried forward since the financial crisis. The likely additional tax yield from such a measure would depend on the banks future profitability levels which cannot be accurately estimated at present.
The value of these tax losses to the State is realised through share sales. The banks share prices recognise a certain value for the tax losses and as such the State will continue to receive value for the balance of tax losses as future sell-downs complete. There would be a negative impact on the valuation of the State’s investments in the banks from a change in tax treatment of losses carried forward.
Despite the scale of losses accumulated, the banks contribute to the Exchequer through the financial institutions levy. It should also be noted that loss relief does not shelter profits made by the bank in all their corporate entities.
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.
