Richard Boyd Barrett
Question:61. Deputy Richard Boyd Barrett asked the Minister for Finance if he will introduce a windfall tax on banks and vulture funds; and if he will make a statement on the matter. [21569/23]
View answerTuesday, 9 May 2023
Questions (61)
Oral answers (6 contributions)
Greedflation is something that now, somewhat indirectly, even the ECB is acknowledging. We see it in energy and the price of food. This question is about whether it needs to be tackled, and we believe it does, in the area of vulture funds and banks profiteering off the hikes in interest rates. Is the Government willing to respond by imposing a windfall tax on those banks and vulture funds that have made super-profits from the interest rate hikes we have seen?
As a small open economy connected to Europe, the US and the wider world, Ireland is committed to a competitive, transparent and stable corporation tax system. As the Deputy will be aware, the trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. We are committed, under the pillar 2 agreement, to increasing to an effective rate of 15% for in-scope companies. Some of the main features of the current regime are its simplicity and that it applies to a broad base. Imposing additional taxes on certain sectors would involve increased complexity and could change the attractiveness of Ireland's corporate tax regime. While it is possible that imposing such taxes could lead to theoretical gains, there is a risk of such taxes leading to lower levels of economic activity and to companies passing the additional tax burden on to their suppliers or consumers.
A number of factors would need to be considered as regards introducing a windfall tax on banks, such as the potential for negative impacts on bank customers and bank employees, and further reduced appetite for competition in a sector that has recently seen the departure of two very significant retail banks. These issues have been considered and discussed with Deputies in detail in debates on various proposals relating to taxation of the banking sector.
Deputies will be aware that a banking sector-specific measure has been in place since 2014 in the form of a bank levy. As the levy is due to expire this year in law, my Department is currently carrying out a review to help inform consideration of its future. This has involved a public consultation that ran for a month and closed just last week. I hope to be in a position to announce my decision on the levy's future based on the review's findings and recommendations as part of budget 2024.
It is a very spurious argument to say that because we saw a few banks leave, we should not consider taking any measures to put taxes on the superprofits that the remaining vulture funds and banks are making. They are doing so at the expense of the incredible hardship mortgage holders are suffering who have seen vulture funds charging 7% and 8% interest, which means thousands of additional euro.
Even the mainstream banks are hiking interest rates and making superprofits. The banks that left did so in the tax environment the Minister is defending. They went because, frankly, they have no loyalty to their customers. They do not give a damn about them. They just left because it suited them. Is it the idea that we pander to entities that have no interest in their customers while their customers are being absolutely hammered, as they are at the moment, and not impose some kind of tax on the superprofits they are making to use those revenues to protect mortgage holders who are being crucified?
I am not pandering to anyone, but in the position I am in, I have the advantage of engaging directly with some of the world's largest companies that have invested in Ireland and continue to do so. One of the issues that is repeatedly raised is the importance of predictability, certainty and stability when it comes to corporation tax policy. That has served Ireland well. The Government has made the decision to be part of the OECD base erosion and profit shifting, BEPS, agreement. We will faithfully implement pillar 2. This House will have a role in that regard when I bring forward the finance Bill later in the year. We are at the table negotiating the final details of pillar 1 with respect to the reallocation of taxing rights. It does not serve Ireland well, given the strength of our foreign direct investment success - the fact that we continue to win investments - to change taxation policy on the hoof. That is not what I will do as Minister for Finance.
This is not a general discussion about corporate tax rates; this is a specific call for a windfall tax on vulture funds and banks that are profiteering at the expense of mortgage holders who have seen an increase in mortgage interest repayments to the tune of €4,000 or €5,000. These are unsustainable increases in a situation of bonanza profits being made by these vulture funds that affects hundreds of thousands of ordinary people. Even the EU has agreed to exceptional windfall taxes on the energy sector, which the Government still has not implemented, although it has committed to do so. I am arguing that in the case of vulture funds that do not contribute anything to our country - they just buy up people's mortgages and then charge them massive interest on their mortgage debt - or banks that are making superprofits on the basis of increased interest rates, it would be reasonable to impose a time-limited windfall tax while they are making superprofits and to use those revenues to protect mortgage holders.
When it comes to banks, because the existing levy comes to an end in law this year, we are carrying out a review. I will make the decision about the future of that levy known when the budget is announced. As the Deputy will be aware, I published a terms of reference for a review of the investment fund sector on 6 April. Specifically with regard to the taxation of funds, the review will examine the role of real estate investment trusts and Irish real estate funds in the property sector, including how they support housing policy objectives. There is a role for institutional investors in our housing market to provide the capital needed to meet critical housing needs. The review will take an evidence-based approach to assessing this role. There will be extensive engagement with the sector, relevant public sector representatives and other stakeholders, and Members of this House will have the opportunity to input into that review directly. I look forward to discussing it with the Deputy in the period ahead.