Budget sees revised bank levy set to raise €200m a year

The Government is to revise the bank levy to raise €200 million – more than double the amount it accrues in its current form.

The levy, imposed by the government on the main banks in the aftermath of State bailouts a decade ago, currently raises about €87 million a year.

Previously it had brought in about €150 million per annum but had fallen off since Ulster Bank and KBC pulled out of the Irish market. While the industry has long raised difficulties created by the levy, Minister for Finance Michael McGrath indicated to the Dáil on Tuesday it would likely be expanded.

“It is important that the banking sector continues to make a contribution to the Irish economy following the support they received during the financial crisis,” he said as he announced Budget 2024.

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“In that context, I plan to put in place a revised bank levy in 2024, to raise €200 million. I will review the levy again next year to ensure it remains appropriately calibrated.”

AIB, Bank of Ireland and Permanent TSB currently pay the levy, which is calculated off the amount of deposit interest retention tax (Dirt) the lenders pay.

A spokeswoman for industry lobby group the Banking and Payments Federation Ireland assailed the change, warning “the arbitrary nature of the increase in the levy introduced in today’s budget risks Ireland’s reputation as a stable, consistent and transparent tax regime” and the banking landscape in Ireland had “changed significantly” since it was originally set up.

“While State ownership has been a feature of the Irish retail banking sector for the past decade, the Government’s strategy is to return banks to private ownership and the State’s present day recovery value from the three banks is over 94 per cent of its original investment,” the spokeswoman said in an emailed comment.

Still, it’s not yet clear what the direct impact will be on the three banks, Davy analyst Diarmaid Sheridan noted.

“The bank levy has increased to a slightly higher than expected level and the devil will be in detail next week with the Finance Bill,” he said. “To the extent the revised levy is seen as fairer, in particular on PTSB, it will be accepted by the market as a reasonable outcome,” he added.

The levy has been in place since 2014 when it was brought in for an initial three years. The government of the day has extended it several times since and is due to expire in its current form at the end of the year.