Poll: Should banks be stopped from using crash-era losses to lower their tax bills?

A proposed policy change could have negative consequences for taxpayers.

By Conor McMahon Reporter, Fora

THE OIREACHTAS PUBLIC Accounts Committee (PAC) will recommend that banks should be prevented from using losses accumulated during the crash to lower their tax bills over a long period of time.

In an interview with the Sunday Business Post, PAC chair Sean Fleming said the committee will call for the introduction of a so-called ‘sunset clause’ for banks’ deferred tax assets.

Deferred tax assets, or DTAs, arise when a company makes a loss and can be offset against future profits. If such a law came to pass, it would limit the use of losses for banks to a 10-year period.

AIB has around €2.6 billion of DTAs on its books, and it has been predicted that the bank is unlikely to pay taxes on its profits for nearly two decades to come.

However, analysts warn that the PAC’s proposed ‘sunset clause’ could negatively affect the value of State-controlled banks AIB and Permanent TSB – which would ultimately hurt the taxpayer.

In a briefing note, Goodbody stockbrokers indicated that banks that are majority owned by taxpayers would be worst affected by the proposed policy change.

Davy analysts agreed “the State would be the biggest loser” and warned that the ‘sunset clause’ could have “adverse implications for other parts of the banking sector”.

With that in mind, we’re asking Fora readers this week: Should banks be stopped from using crash-era losses to lower their tax bills?

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