This article first appeared in the Irish Examiner.
AIB will not pay a cent in corporation tax for more than 20 years, despite making €814m profit in the first half of this year, writes Daniel McConnell.
The situation was branded “an absolute disgrace” by Pearse Doherty of Sinn Féin, who was questioning AIB bosses at the Oireachtas Finance Committee yesterday.
“We have a significant deferred tax asset, which is the guts of €3bn,” said the bank’s CEO, Bernard Byrne. When asked by Mr Doherty as to when he expected the bank to start paying tax on its profits, Mr Byrne said: “In excess of 20 years on a current basis. Yes.”
The anomaly has come about because the bank has a so-called deferred tax asset of €3bn, which under tax and accounting rules allows it to offset previous losses against future tax bills.
In 2009, the then finance minister Brian Lenihan sought to prevent bailed-out banks carrying massive historic losses into the future as assets. However, in 2013, Michael Noonan reversed the rule change.
Responding to Mr Doherty, Mr Byrne sought to defend the deferred tax asset, saying that, without it, AIB’s bailout could have been €3bn bigger — because it was able to count the loss as a tax asset. AIB’s profit for the first half of this year was €814m, effectively tax- free.
Earlier this year, the State sold a 25% stake in the bank, yet taxpayers retain 70% of the bank’s shares.
Mr Doherty told the Irish Examiner that Mr Noonan changed the rules for one reason and one reason only — to make the bank more attractive for sale.
“This is shocking and is a major issue for the taxpayer. This bank will not pay any tax on huge profits,” he said.