Bank chief executives are seeking an urgent meeting with the Minister for Finance, Mr McCreevy, in a last-ditch attempt to persuade the Government to abandon the proposed €300 million levy on all financial institutions.
Sources have told The Irish Times the chief executives will be reminding the Minister about a deal agreed in the mid-1990s under which the banks agreed to stop "aggressive tax planning" in return for the abolition of the last bank levy.
The chief executives of all Irish financial institutions signed a letter giving this undertaking to the then Minister for Finance, Mr Ruairí Quinn, which resulted in the abolition of the 16-year levy. The levy had been introduced in the late 1970s, initially for a year, as a temporary measure to raise extra cash for the struggling Exchequer.
The Irish Bankers' Federation (IBF) has been meeting officials at the Department of Finance since the new levy was announced in the December Budget. It is also lobbying for the abolition or reduction in the new stamp duty charges to be imposed on credit and other bank cards.
The meeting between the senior bank executives and the Minister would have to take place early next week if they are to influence his thinking. The Finance Bill, which will enforce the levy and new stamp duty charges, is due to be issued on February 6th.
A Department spokesman would not comment on any representations about the levy but stressed that the Minister remained committed "to closing off aggressive tax avoidance schemes".
Earlier this week, the Department closed a major loophole which allowed wealthy clients significant tax benefits. Mr McCreevy confirmed that his decision to close this loophole was inspired by an Irish Times report about the marketing of the AIB Treasury headquarters building in the IFSC. Investors considering this purchase could have availed of allowances associated with it that could have yielded tax benefits of almost €26 million.
The IBF refused to comment on continuing discussions yesterday. Some sources, familiar with the deal at that time, have suggested the bankers' written undertakings in the 1990s were no more than "platitudes" and could not have been enforced by Government.
The large financial institutions have a responsibility to deliver profit growth for their shareholders and would be expected to reduce all costs, including taxes, to the lowest possible levels.
It is intended that this levy will be calculated on the amount of Deposit Interest Retention Tax (DIRT) due to the Exchequer from the banks over the next three years and will be roughly equal to 50 per cent of their total contribution.
After Anglo Irish Bank's a.g.m yesterday, its chief executive, Mr Sean FitzPatrick, criticised the move saying the Government had picked an "easy target" to find extra cash.
He warned, however, that the measure was dimly viewed by international investors who were now uncertain about Government policy. "US investors in particular have been asking whether Irish Government policy has shifted away from being pro-business?"
Announcing the abolition of the levy in 1995, which was worth £36 million (€45.7 million) to the Exchequer in that particular year, Mr Quinn referred to arrangements agreed with the banks to ensure the loss to the Exchequer would be compensated for by earlier payments of corporation tax. He said he had also secured the banks' agreement to be more supportive of small and medium-sized businesses and said he expected the financial institutions to be "responsible" in their tax planning.
