While much of the budget was artfully leaked well before Minister for Finance Michael McGrath stood up in the Dáil on Tuesday, one issue that had not been cleared up in advance was the future of the bank levy.
The levy, in place since 2014 on the main retail banks in the country, had raised about €150 million per year but that had gone off a cliff with the exit of Ulster Bank and KBC from the Republic. Last year it only raised €87 million.
We got little detail from McGrath’s speech beyond that the levy would be revised to bring in an estimated €200 million next year. While the final details will be revealed when the Finance Bill is published next week, we now have some of the picture for what the revised levy will involve.
According to a Department of Finance briefing note, the levy will be calculated around the level of customer deposits held by the liable institutions. That is a change from the current method, which sees the levy based off how much deposit interest retention tax (Dirt) the banks pay.
That, of course, is not all the detail. While the briefing note makes clear the base year for measuring deposits will be 2022, which deposits the department deems to be “in scope” for the levy, as well as the rate it will be set at, are questions that may have to wait until the Finance Bill is made public.
Still, it seems clear that part of the reason for the change in methodology for the levy is to not disproportionally hit Permanent TSB compared with Bank of Ireland and AIB. Despite that bank’s growth since taking on much of Ulster Bank’s assets, it is still comfortably the smallest of the three banks. There was a need for the Government to be at least cognisant of that reality.
The revised levy will be in place for 2024 initially, but by then it will have been around for a decade. If the Government does manage to get €200 million from the banks as planned, are they really going to let the levy expire next year?
