Vol. 449 No. 5
59 Mr. J. Walsh asked the Minister for Finance the net tax saving to the banks in each of the next three financial years likely to arise from the phasing out of the bank levy; and the cash flow effects on the Exchequer arising in each of the calendar years 1995 to 1998 inclusive, taking into account any offsetting measures envisaged. [4118/95]
Under the provisions of the Finance Act, 1992, the banks were required to make an annual payment of £36 million by way of the bank levy. This amount could be fully offset against the banks' corporation tax liability if that liability increased above a certain threshold. Since 1992, the levy has been so offset, because there has been a large increase in the banks' corporation tax liability.
In my recent budget, I announced that the bank levy is now being phased out from £36 million in 1994 to £24 million in 1995, to £12 million in 1996, and nil in 1997. The banks have agreed to a compensatory cashflow arrangement whereby they will make an earlier payment of corporation tax in 1995 to fully cover the 1995 reduction in the bank levy. This earlier payment ensures that there will be no cash-flow loss to the Exchequer this year from the reduction in the bank levy. This compensatory cash-flow arrangement will be continued in subsequent years.
