Minister rejects banks' call for meeting on levy

The Minister for Finance, Mr McCreevy, has refused a request from the chief executives of the main banking groups to meet before this week's publication of the Finance Bill. They wanted to try to persuade the Minister to ditch a new levy on their profits that was announced on budget day.

The Minister's refusal to meet the banks indicates he is determined to push ahead with the proposed levy, despite fierce opposition from the financial industry, which complains that it is an unfair imposition.

The levy will involve a charge on the profits of financial institutions of €100 million a year for the next three years. A spokesman for the Irish Bankers' Federation (IBF), the representative body for the industry, said that it was the Minister's prerogative to decide whether to meet industry representatives.

The financial institutions are believed to be arguing that they had adhered to a commitment made in the mid-1990s to the then Minister for Finance, Mr Ruairi Quinn, whereby, in return for the abolition of an earlier levy - which had been in place for 16 years - they promised not to engage in "aggressive tax planning".

However, with the Exchequer finances tightening, Mr McCreevy has decided to reimpose the levy to claw back some of the money that the banks have gained from the successive reductions in the main corporation tax rate, now 12.5 per cent.

The IBF has also been lobbying the Department of Finance about the sharp stamp duty increases on ATM, Laser and credit cards announced on budget day. The Finance Bill, which will be published on Thursday, enacts the tax measures announced on budget day and generally also includes further changes not alluded to in the budget.

This year, in addition to the precise arrangements for the levy, tax experts say there will be a close focus on the details of capital gains tax changes announced on budget day, in particular how the end to roll-over relief will be applied.

Roll-over relief, which the budget closed off, had allowed companies or entrepreneurs to defer a capital gains charge by reinvesting the proceeds of certain asset sales into their businesses.

New anti-avoidance measures for the Revenue Commissioners are also expected. Tax strategy papers published last week, which contained details of discussions by senior civil servants and advisers, suggest there may also be technical tax changes relating to IFSC companies, notably in the areas of securitisation and asset management.

There is also speculation among tax experts that there may be a further tightening of rules in relation to companies availing of the 12.5 per cent corporation tax rate. This could come in the form of fresh measures to tax company profits that are not distributed to shareholders. Restrictions already apply in this area in relation to professional income, rental income and income from investments.

The aim would be to ensure that taxpayers cannot avoid tax due on income - normally liable for tax at the top 42 per cent rate - by sheltering it in a corporate structure liable to 12.5 per cent corporation tax.