Michael McGrath, the minister of finance, was adamant about raising the bank levy’s revenue because he believed that when interest rates increased, the banks would likely see “very significant profits.”
During pre-budget talks, Mr. McGrath stated that he wanted to target a take “much higher” than €150 million from the banks because they were profitable and much of their earnings were “sheltered from tax” as a result of the huge losses they had sustained during the financial crisis.
The Minister was also cautioned during the discussions that any expansion of the bank levy outside of the primary banks would probably be met with legal challenges in the courts. Officials raised concerns in a series of presentations to the Minister regarding the reason behind the levy’s application to financial firms that were not saved after the Celtic Tiger economy collapsed.
According to the proposal, the charge was first imposed in 2014, was later extended multiple times, and had started to stray from “its original time frame and effect.” It stated that because of the way the charge was computed using dirt payments [Deposit Interest Retention Tax], many other institutions were now accountable for it.
According to the submission, “it is felt that such institutions may have grounds on which to challenge their being required to pay the levy, given that they have not benefited from taxpayer-funded assistance during the financial crisis and may not even have been present in this country at that time.” If alternative providers of comparable services are not included by the charge, entities may also contest the validity of the levy.
Concerns regarding the current levy’s calculation, which may serve as a “disincentive” for banks to provide savers with greater interest rates, were also raised by department officials.
Their submission to the Minister stated, “The lower the amount of interest paid, the lower amount of bank levy which will be paid.”
Department of Finance banking division officials also raised concerns about the possibility that a large increase in the bank tax would just be passed on to customers.
