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Thursday, 25th April 2024 |
| Industry to protest over levy |
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| Financial services sector up in arms over discriminatory levy |
The government is to raise ?100 million per year from the financial sector between 2003 and 2005, as Minister for Finance, Charlie McCreevy seeks to balance the country’s accounts. The levy, announced in the recent budget, will be based on the amount of tax payable by financial institutions on deposit interest in 2001.
The levy will impact the domestic banking sector but will not affect international financial institutions operating in Ireland without a significant Irish deposit base.
Similar to the bank levy first introduced temporarily some 20 years ago and finally phased out in 1997, the Minister aims to raise ?300 million from the levy.
The amount payable by each institution will be subject to an upper limit and it is estimated that for most companies or groups it will be equal to 50 per cent of the tax payable by them in the form of a special stamp duty.
Payment will be due in 2003 and full details of the provisions will be contained in the 2003 Finance Bill.
Speaking to Finance, Felix O’Regan, spokesperson for the Irish Bankers Federation said, ‘The sector is disappointed and concerned at the reintroduction of what is effectively a levy.’
Aileen O’Donoghue director of Financial Services Ireland, echoed this sentiment. ‘This proposal will send out a very negative signal internationally about the Government’s attitude to the financial services sector. It is quite extraordinary that one industry in the economy has been singled out for such a significant tax measure. This new measure will impose an additional burden on business in this sector.’
Both the Irish Bankers federation and Financial Services Ireland are seeking urgent meetings with the Department of Finance to discuss the implications of the new tax.
Paul McGowan, tax partner with KPMG also expressed alarm at the development. ‘The reintroduction of a tax that is so arbitrary and selective bearing no relation to either profitability or net worth is regrettable. However, it is a sector which receives little sympathy from the media or general public and is therefore an easy target’.
However, the levy may yet prove to be unsustainable as the discriminatory nature of the levy runs counter to the spirit of the agreement reached between the Irish government and the EU in relation to corporation tax, which is founded on the principle of universal treatment for all sectors.
Gary O’Mahony, a tax director at Ernst & Young, believes that the proposed duty may be open to a constitutional challenge or review under EU non-discrimination rules. |
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| Article appeared in the November 2002 issue.
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