The Government is considering proposals to introduce radical new taxes and levies on banks and financial institutions in a move to recoup monies lost when corporation tax rates are reduced.
The measures being examined include stamp duties on financial products and insurance levies. Officials are believed to be concerned that any new taxes be levied on the banks, rather than their customers.
Already the Office of the Revenue Commissioners collects taxes on ATM cards, cheques and credit-card accounts, which are generally passed on to customers. The plans, currently being examined by the Department of Finance, have been under consideration for a year, but it is understood the financial institutions have not yet been consulted in detail.
In July, it was announced that, under an agreement with the European Commission, Irish corporation tax was to be reduced from 32 per cent to 12.5 per cent between now and 2003. As part of the agreement, a preferential corporation tax regime of 10 per cent would continue until 2005 for IFSC or Shannon Customs-Free Zone companies and 2010 for manufacturing exporters. At the time there was criticism that the banks, which are making such large profits, should have their tax bill cut by more than 250 per cent during the next five years.
When asked about the proposals to levy the financial institutions, a Department of Finance spokesman said: "As part of the ongoing review of the tax code this area is being looked at, as normally occurs." Earlier this year, the proposals were to be considered by the Tax Strategy Group and then forwarded for inclusion in the Finance Bill, "if appropriate". A spokesman for the Irish Bankers' Federation said the taxes which already exist on ATM cards and cheques are "quite unique" by European standards.
"The business of a tax on any financial product or service seems to be something we are ahead of the posse on, and any further steps would put us further out in comparison with what prevails elsewhere," he said.
When the corporation tax reductions were announced, it was clearly signalled that the Minister for Finance, Mr McCreevy, was considering the curtailment or abolition of many business tax reliefs, in a move to boost revenue.
The decision on corporation tax was made because the European Commission insisted that all businesses be taxed at the same rate. It was decided to reduce the tax rates to the levels outlined to maintain an attractive rate for companies currently enjoying the preferential rates. Sources said at the time that a new tax on any particular sector would be likely to meet with objections from the Commission.
The reintroduction of the levy on banks, which was introduced in the early 1980s and abolished a few years ago, might be opposed by the Commission. Another possibility mooted was to levy large charges on the banks to pay for the new Financial Services Regulator.
