Dáil Éireann Debate, Tuesday - 28 July 2020
262. Deputy Pearse Doherty asked the Minister for Finance the estimated full-year additional corporation tax that could be expected in 2021 if the bailed out banks had applied to them a 25% limit on 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. [18773/20]
Amharc ar fhreagraAs 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. If the restrictions suggested by the Deputy were introduced, the Exchequer impact would depend on the future profitability of banks as this would determine their capacity to utilise their losses within the restricted time-frame. Therefore, it is not possible to quantify the estimated additional corporation tax revenue from the measures referred to by the Deputy.
I believe that a restriction of the nature proposed would give rise to consequences that would make it difficult for me to fulfil other objectives in respect of the Irish banking system. Such a change could have knock on implications for the cost of lending and deposits for consumers and businesses in Ireland.
It is important to understand that the State is actually getting value today from these deferred tax assets through our share sales. Should a restriction as proposed be introduced, it could be expected that the value of the State’s remaining shareholdings in the banks would decrease due to write-downs in the value of those deferred tax assets. The State is a substantial owner of these banks and what is detrimental to their balance sheets is also detrimental to the State’s investment.
It is also the case that such a restriction would damage the State’s credibility with investors. Tax losses forward are included as a deferred tax asset on a company’s balance sheet and AIB’s return to the stock market in 2017 was on the basis that those deferred tax assets could be crystallised if AIB realised sufficient profits in the future.
Finally, the banks are also contributing to the Exchequer through the financial institutions levy, introduced in 2013, which has generated an annual yield of approximately €150 million to the Exchequer.
These considerations are discussed in further detail in a 2018 technical note on the potential consequences of changes to the treatment of corporation tax loss relief in respect of the banks, prepared for the Committee on Finance, Public Expenditure and Reform, and Taoiseach, available online at: https://www.gov.ie/en/publication/436ff7-technical-note-on-the-potential-consequences-of-changes-to-the-treat/.
