The Rural Independent group have accused the government of allowing Ireland’s three major banks – AIB, Bank Of Ireland, and Permanent TSB – to avoid corporation tax, despite reporting record profits.
Mattie McGrath TD, Leader of the Rural Independents, said that the alleged practise is “deeply troubling,” and that the bail out “continues” sixteen years after Irish taxpayers paid a heavy cost to bail out Irish banks.
“The banks are allowed to use a tax loophole known as Deferred Tax Assets (DTAs) to offset their current profits with historic losses,” he said.
“It is deeply troubling that this practice persists today, especially considering AIB’s recent announcement of record profits. These profits, ironically, are amassed on the backs of the very taxpayers who rescued the bank over fifteen years ago. 2023 marked the bank’s most profitable year ever, with a net profit surge to €2.058 billion, a staggering 169 percent increase from the previous year.
“This was largely driven by an 83.3 percentincrease in interest income from Irish mortgage holders. Furthermore, AIB’s new lending increased by €12.3 billion last year, giving the bank control over 33 percent of the mortgage market.”
He also drew attention to Bank of Ireland and Permanent TSB, stating:
“In the meantime, the Bank of Ireland, another beneficiary of a bailout, is also reporting record profits. The bank now claims a 41 percent market share of the Irish mortgage market and reported a rise in pretax profit of 92 percent in 2023 to €1.9 billion, driven by interest rate hikes.
“Similarly, PTSB’s underlying profit soared to €166 million, and its net interest income rose by 71 percent to €620 million, giving it control over 19 percent of the mortgage market.”
Deputy McGrath said that despite the record-breaking profits, the top banks will not contribute any corporation tax to the exchequer.
“Collectively, they will pay a paltry tax rate of 0.122%, calibrated in the form of a bank levy, amounting to a mere maximum of only €200 million for 2024,” the Deputy said, describing the situation as “completely untenable and a real kick in the teeth to the taxpayers of Ireland.”
“These three banks, kept afloat by taxpayer bailouts in the 2008/2010 period, are now using a loophole to accumulate enormous profits,” the Rural Independents continued.
“The tax arrangement for the banks was sanctioned by the Fine Gael/Labour government in 2014, altering the law to permit bailed-out banks to offset 100 percent of their previous losses against future profits.
“Before this change, these banks could only offset 50 percent of their past losses against profits in any given year. The consequence of this is that these banks will remain tax-exempt for decades with PTSB paying no tax until 2038, and AIB and BOI until 2037.”
The Independent TDs said the “untenable” situation must be rectified, calling for two measures to be taken. Firstly, an increase in the banking levy for 2024, and after that, for each subsequent year, to €600 million, which they said would be achievable through emergency financial legislation.
“The immediate introduction of legislation by the Minister for Finance to stipulate that banks can no longer exploit Deferred Tax Assets (DTAs) loopholes” to avoid tax, the parliamentary group said.
“These three banks, which control 93 percent of the Irish mortgage market, offer no flexibility to mortgage holders when it comes to interest rates, leading to record profits and a dramatic growth in their net interest margins.
“These banks are not only manipulating the government to secure an unprecedented deal, but this is happening at a time when farmers, small businesses, and personal customers are all subjected to significantly higher lending rates while receiving the lowest interest rates available anywhere in the Western world.”
“The government’s acquiescence to the banks is deeply concerning and cannot persist, especially when the balance sheets of the three banks are expanding without any effort on their part due to a lack of competition within the Irish market.”