In June 2016, the Department of Finance held a Public Consultation on the Financial Institutions Levy. This consultation sought the views of stakeholders on the proposed approach for calculating the Financial Institutions Levy for the years 2017 to 2021, including their views in relation to the need to review the methodology for calculating the Financial Institutions Levy, the proposed approach recommended by the Department of Finance or suggestions for an alternative approach, and any additional factors to be taken on board in any evaluation of the existing formula.
Following on from the Public Consultation and the Department’s own review of the levy calculation methodology, the Minister for Finance announced in October 2016 that the DIRT based formula should be retained but that the base year for calculating the levy in 2017 and 2018 would be changed from 2011 to 2015. The Minister also decided to introduce a rolling two-year series of base years which will introduce a new base year of 2017 for calculating the levy in 2019 and 2020 and a new base year of 2019 for calculating the levy in 2021.
The introduction of the rolling two-year series of base years has a twofold effect. Firstly, it ensures that financial institutions entering the market over the five further years for which the levy will apply will be subject to the levy and financial institutions exiting the market will cease to be subject to the levy. Secondly, it will help to correct, on an ongoing basis, any anomalies for individual institutions thrown up by prevailing market conditions, such as the interest rate offering, in any one year.
In order to maintain the annual yield from the levy at €150 million, the Minister increased the rate at which the levy is charged from 35% to 59% for 2017. This is because the assessable amount, DIRT payments in 2015, have reduced significantly since 2011. This new rate, combined with the new 2015 base year, will preserve the existing contribution of €150 million paid by the affected financial institutions. That rate will be subject to review to ensure that the yield from the levy is not impacted from changes in interest rates and/or DIRT rates.
The responses to the Public Consultation are now being released. Please note that the Department has removed some tables and figures from the submissions lest they contain sensitive institutional information.