In two months we will get Budget 2025. One of its features may be a discussion on the bank levy. This levy was first introduced in Budget 2014 and was initially intended to apply for three years, but has been extended multiple times since.
In 2024, it will raise €200 million from AIB (and its EBS subsidiary), Bank of Ireland and PTSB. Those institutions have paid more than €1 billion since the levy came in 10 years ago.
In Budget 2024, the then Minister for Finance Michael McGrath said that he would review the levy again “to ensure it remains appropriately calibrated”. In my view the new Minister for Finance Jack Chambers should take a different approach – rather than just look at the traditional banks, he should super-levy the online banks to build a fund to restore rural towns and communities.
The online banks are the cats who get the cream in Ireland. Revolut and others have blossomed as digital services and Irish people’s love affairs with their phones and online have grown. Everyone seems to have a Revolut account. Every month or so, we read of a new online entrant. The latest is Bankinter and they are very welcome and join a long list like Bunq, Revolut, N26 and others that find Ireland terribly attractive.
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Every week we read about some new online banking service offering mortgages and so forth.
But none of them have branches in our cities and towns and none of them sponsor a local GAA team or local Chamber event. And even though we hear lots of horror stories about people losing money online, the level of scrutiny or criticism of digital banks by the public, media and others seems nothing compared to the traditional banks.
The online banks win too when it comes to the levy. The basis for the levy is calculated according to the amount of Dirt paid by a liable financial institution in a specified base year. But online banks are not liable institutions. And this needs to change.
Online banks should be super-levied by the Minister for Finance in some way that they cannot avoid. While we all have a view about the traditional banks and the economic crash, they do contribute much to the country. While they have fewerbranches now, they still have a wide presence, probably at a cost in some places.
Where I live, Tinahely in Wicklow and where I work, in south Wicklow and north Wexford, bank branches have become too scarce. In rural Ireland, people have to drive vast distances to get to a physical bank branch that has cash and services. In Tinahely, the former Bank of Ireland premises remains a ghost to times past in the lovely market town.
Communities in Ireland, urban and rural, need renewal. We especially need to get back to where Irish market towns are hubs of great activity. They had lots of different services, including banks and post offices that drew in people. Now some have boarded up main streets.
Funds from a super levy on online banks should be ring-fenced funds for communities, urban and rural. The banking levy should be used as a positive force for communities by having two levels of it. The first rate should be for banks that offer physical branches, deliver normal banking services like having cash and offering mortgage, loan and other services locally. The more branches you have the less your levy should be.
The second rate should be for those offering fewer services, if you have no physical branches, you should be paying a super levy and a high one at that.
Sucking up the bank levy into the State coffers where it goes into the general funding isn’t good practice. Levies should be used for a particular purpose.
The banking ones, in my view, should be put back into communities. While rewarding the few banks with branches and spread, the remainder of the bank levy should be used for the regeneration of urban communities, rural towns and villages, supporting the restoration of vacant properties, the development of tourism facilities and local services.
We cannot let online services harvest the nation without putting anything back in. We have seen the sorry state this has left public broadcasting in, with online destroying terrestrial television and leaving our State broadcaster with gaping holes in its future.
Our urban communities and rural towns cannot afford any more gaping holes, literally and metaphorically, so the Minister for Finance should not miss a chance to act in Budget 2025. It will be good for banking too, bringing in a level playing pitch for once.
Peter Stapleton is a Fine Gael councillor in Wicklow and a businessman with a background in corporate finance in Dublin and London
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