Results this week from the three domestic banks – AIB, Bank of Ireland and Permanent TSB – were something of a mixed bag. Increased lending, particularly mortgages, was a positive, while both Bank of Ireland and AIB increased dividend payments to shareholders. But they all still have legacy issues dragging on their businesses.
A common theme across the three was their use of deferred tax assets to shelter most of their profits from being taxed. They were able to do this because they all have substantial unutilised tax losses they can write off against their tax liabilities.
In the case of Bank of Ireland, the deferred tax assets amount to €1.165 billion in Ireland and Britain combined and its annual report tells us that management’s view is that these won’t be exhausted until 2030.
Writing losses off against profits is perfectly legal and can be done by businesses in all sectors of the economy, not just the banks.
But the banks are a special case, given their combined €64 billion bailout by the State after the 2008 crash, with AIB, Bank of Ireland and PTSB getting just under €30 billion between them.
In spite of calls from the Opposition, the Minister for Finance has indicated that he does not plan to intervene on the matter. Tax law can’t be applied to all businesses except the banks, so the argument goes.
His department would also note that a €150 million-a-year bank levy is already in place and that Bank of Ireland and AIB are now paying substantial dividends to the State. In the case of AIB, the payment was €327 million from last year’s profits.
This won’t stop the Opposition from cranking up the pressure on the issue as time moves on, particularly if the banks continue to increase their profits. The legacy of the crash comes in many shapes and sizes and this is just one of the issues that will not go away.
