The Government may allow rescued banks to use more of their past losses to cut future tax bills and help them return to profit, according to a person with knowledge of the matter.
In 2009, the Government created a law to ensure lenders that transferred loans to the National Asset Management Agency paid tax on at least half their future Irish profit, irrespective of their deferred tax assets.
The limit may be lifted either in the 2014 Budget, or in the subsequent Finance Bill, said the person, who asked not to be identified, as a decision has not been made.
Department of Finance officials declined to comment on the possibility of lifting the restriction.
According to Bloomberg, AIB would be the biggest winner from a law change.
At the end of June, AIB had €3.9 billion of deferred tax assets, amassed during the country's financial crisis. Bank of Ireland had €1.7 billion of such assets.
"While not a panacea in itself, a removal of this obligation would be one additional measure in returning the sector to normal," Ciaran Callaghan, an analyst with Merrion Capital, said last month.
He said that lifting the restriction would generate about €250m for AIB and Bank of Ireland by 2019.
Finance Minister Michael Noonan, who wants to sell the state's bank stakes, has said that the country's two largest
lenders will return to profit next year.
