Finance Minister Jack Chambers has confirmed that the bank levy will be extended as part of Budget 2025, which is set to be unveiled on October 1. The levy, which was first introduced in 2014, is a tax imposed on banks that received State assistance during the financial crisis. Chambers stated that the proceeds from the levy would be used to provide tax relief for families and workers.
The minister explained that the decision to extend the levy is based on the fact that Irish banks are currently “highly profitable” and are benefiting from the country's stable economic position. He believes it is only fair for banks to contribute to the State's finances during this period.
Addressing Cost of Living Concerns
Chambers emphasized his awareness of the ongoing struggles many people face due to the rising cost of living. He reiterated the government's commitment to providing additional support to those affected in the upcoming budget. He highlighted that the revenue generated by the bank levy will provide him with the necessary resources to implement a “substantial income tax package” and further reduce the tax burden for families and workers.
Tax Cuts and Budgetary Plans
The minister's announcement comes as part of the government's overall budgetary plans for 2025. The total budget package, as outlined in the Summer Economic Statement, will amount to €8.3bn, comprising spending and taxation measures. Of this, €6.9bn is earmarked for spending increases, while €1.4bn is allocated for tax measures. The government has also signaled that a cost-of-living package will be included in the budget, marking the third consecutive year for such a measure.
The Bank Levy: A Source of Debate
The bank levy has been a subject of debate in recent years. Sinn Féin has called for the levy's revenue to be doubled to €400 million, arguing that banks' profits are fueled by interest rate hikes imposed on customers. The party's spokesperson, Pearse Doherty, has voiced these concerns.
While the government has ruled out introducing a windfall tax on bank profits, it has pointed to the existing levy as a mechanism to address the issue of bank profits. Other European countries, such as Italy, Spain, Hungary, the Czech Republic, and Lithuania, have implemented or indicated plans to introduce windfall taxes on banks.
The Levy's Evolution
The revised bank levy, introduced by Michael McGrath, Chambers' predecessor as finance minister, in Budget 2024, replaced the previous levy that was in place since 2014. The new levy is calculated as a stamp duty at a rate of 0.112pc of the total amount of money held on deposit by the banks at the end of December 2022.
The Levy's Scope and Future
The levy applies to the four major banks that received State assistance during the global financial crisis: AIB, Bank of Ireland, PTSB, and EBS. It is calculated based on the deposits held at these institutions.
Chambers has stated that he will be recommending to the government to extend the levy again. However, the exact make-up and composition of the extended levy will be determined by the Cabinet as part of Budget 2025.
A Look Forward: Budget 2025 and its Impact
Budget 2025 is expected to be a significant one, with the government facing pressure to address the rising cost of living and provide targeted support to families and workers. The extension of the bank levy is likely to be just one of several measures aimed at achieving these objectives. The budget will likely be met with scrutiny, as stakeholders and the public alike will be assessing its impact on the Irish economy and the well-being of its citizens. The government will need to carefully navigate these challenges to ensure that the budget effectively addresses the needs of the country while maintaining a sustainable economic trajectory.
