The Government is poised to drop a threat to increase the €150m annual levy on the nation’s banks, according to a person with knowledge of the matter.
According to Bloomberg, when delivering the Budget on Tuesday, Minister for Finance Michael Noonan is set to signal the charge will remain in force after 2016, extending its original three-year lifespan, should the coalition win re-election.
Government officials are reported to be weighing doubling the levy to fund tax cuts, the Sunday Business Post reported last month, citing unnamed people familiar with the matter.
While Mr Noonan warned in May he would introduce a “penal” charge if banks didn’t cut home-loan rates, he said last month that most lenders had done so.
Holding off raising the levy, which is based on deposits, may make it easier to sell the Government’s remaining stakes in the country’s banks.
Allied Irish Bank, which is 99.8% State-owned and pays a €60m annual levy, would be most hurt by an increase, according to Davy analyst Diarmaid Sheridan.
“A significant increase in the bank levy would negatively impact bank profitability and valuations and would come at a time when banks are still state owned,” he said.
Department of Finance officials declined to comment.
