Dáil Éireann Debate, Wednesday - 11 July 2018
89. Deputy Thomas P. Broughan asked the Minister for Finance his plans to limit the availability of banks to offset historic losses against their tax bills; and if he will make a statement on the matter. [30686/18]
Amharc ar fhreagra109. Deputy Pearse Doherty asked the Minister for Finance when the report on banks and corporation tax will be published; and if he will make a statement on the matter. [30971/18]
Amharc ar fhreagraI propose to take Questions Nos. 89 and 109 together.
Corporation Tax Loss Relief is provided for by Section 396 of the Taxes Consolidation Act (TCA) 1997. It allows for losses incurred in the course of business to be taken into account when calculating the business’ tax liabilities on certain profits incurred in other accounting periods. Loss relief for corporation tax is a long standing feature of the Irish Corporate Tax system and is a standard feature of Corporation Tax systems in all OECD countries.
Prior to 2014, section 396C of the TCA 1997 restricted loss relief for NAMA participating institutions, such that only 50% of taxable profits in a given year could be sheltered by losses carried forward. However by Finance Bill 2013 this measure was considered to have outlasted its initial purpose as, subsequent to its introduction, the State had acquired substantial holdings in the banking sector and, as a result, the restriction was deemed to be acting against the State's interests. The restriction was therefore lifted in Finance Bill 2014, putting the remaining NAMA participating banks in the same position with regard to loss relief as other banks, and companies in other sectors, operating in Ireland.
As I have previously stated, changing how tax losses are currently treated for Irish banks, including those that were bailed out by the State, may well have consequences that would make it difficult for me to fulfil other objectives in respect of the Irish banking system. There would be a material negative impact on the valuation of the State's investments from any change in tax treatment of accumulated losses where the banks are concerned. It is critically important to understand that the State is actually getting value today from these tax losses through our share sales.
It should be noted however that the banks are contributing to the Exchequer through the financial institutions levy introduced in 2013, in recognition of the part that the banks played in the financial crisis. The annual revenue to the Exchequer from the levy is approximately €150 million and the levy was extended to 2021 in Budget 2016.
At Committee Stage of Finance Act 2017, I agreed that my officials would produce a report on the effect of limiting tax reliefs on losses carried forward for banks, with the stipulation that the policy outlook I will adhere to is the maintenance of the current position with regard to loss relief and the generation of Exchequer revenue via the financial institutions levy. It is envisaged that this report will be submitted to the FinPer Committee shortly.
