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Irish Gov't Consults On Financial Institutions Levy

by Jason Gorringe, Tax-News.com, London

14 June 2016


The Irish Finance Department has launched a consultation on how the Financial Institutions Levy is calculated and collected.

The annual levy was introduced in 2013 as a temporary measure that was due to expire at the end of 2016. In his October 2015 Budget, Finance Minister Michael Noonan announced that the levy will be extended to 2021, subject to a review of how it is calculated.

The levy is charged at 35 percent of the Deposit Interest Retention Tax (DIRT) payments made by a financial institution in 2011. It is only payable by institutions whose DIRT payments exceeded EUR100,000 (USD112,850) in that year.

The Finance Department conducted an initial review of the levy, during which it considered the performance of the levy to date and alternative methodologies for calculating the levy. It concluded that the base year for calculating the levy needs to be updated, and that new entrants and exits from the market since 2011 need to be taken into account. It also found that there is a need to factor in changes in prevailing interest rates, which ultimately dictate DIRT payments, since 2011.

According to the consultation document, the Department is in favor of the retention of the DIRT-based formula, but has proposed changing the base year from 2011 to 2015. In order to maintain an annual yield of approximately EUR150m, it has also recommended increasing the rate of the levy applicable to DIRT payments made in 2015.

Launching the consultation, Noonan said: "When I extended the Financial Institutions Levy in 2015, I undertook that we would continue to collect a similar amount in each of the years covered by the extension so as to maintain the annual yield at about EUR150m. The key goal now is to look at how the Levy is calculated and collected. I'm delighted today to be able to invite the views of interested parties on this Levy."

"The Financial Institutions Levy allows the financial services sector to contribute towards building a fairer society for all of our citizens as envisaged in the Programme for a Partnership Government."

The consultation will close on July 8, 2016.

TAGS: Institutions | tax | Ireland | interest | financial services | tax thresholds | ministry of finance | tax rates | services

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