What is the Basic Difference between corporate and commercial banking?

Commercial Banking is a bank whose principal functions are to receive demand deposits and to make short-term loans. Corporate Banking is Any financial or monetary activity that deals with a company and its money. so Commercial focus on Individual and Corporate focusses on Companies..

What is the difference between corporate banking and commercial banking?

Corporate Banking means Financing to coporate institutions which has been declared as Corporate entity. Corporate entity means if more than one company falls in the same line of business, financing terms will be same to all the corporate insitution as whole. Enterprise banking means each individual business units will be covered separate, according to the specific requirements for financing. Though more than one company falls in the same group, the financing terms will differ according to each enterprise demands and needs.

corporate banking
Financial services specifically offered to corporations, such as cash management, financing, underwriting, and issuing of stocks, bonds, or other instruments. Financial institutions often maintain specific divisions for handling the needs of corporate clients, separate from consumer or retail banking activities for individual accounts.

Corporate banking is a financial service that is particularly offered to corporations, for instance cash management, financing and underwriting. It can also be defined as a banking service that is given to banks.

Corporate Banking
The Corporate Bank is a leading provider of financial services to top-tier multi-national clients around the globe, serving the financial needs of the world's preeminent corporations and financial institutions. Our relationship bankers have a comprehensive understanding of the wide range of complex financial issues facing our clients. Combined with an appreciation of the broad set of services offered by Citi, this understanding allows us to effectively deliver innovative solutions to our clients, wherever they are located. Corporate Bank's relationship bankers partner with product specialists to provide a full array of corporate banking solutions, from cash management, foreign exchange, trade finance, custody, clearing and loans, to capital markets, derivatives, and structured products. They also partner with our investment bankers to deliver investment banking capabilities to our relationship clients. The Corporate Bank is organized primarily along industry lines and serves clients in more than 100 countries. This organizational model draws upon a deep understanding of industry trends and market knowledge, based on a local presence dating back 100 years in many of these markets. It also enables us to provide a steady stream of innovative cross border and local financial solutions tailored to the specific needs of our clients.

What is corporate banking its functions?

Banking services for large corporations or firms. This type of banking is designed to deal with major financial transactions that do not generally a definition of financing it is (often unsecured), cash management, and other

banking services custom-tailored for large firms. Usually the definition of the business of banking for the purposes of corporate banking, directed at large business entities; private banking

The Corporate Governance of Banks

commercial banks pose unique corporate governance problems for managers and regulators, as well as for claimants on the banks' cash flows, such as investors and depositors. The authors support the general principle that fiduciary duties should be owed exclusively to shareholders. However, in the special case of banks, they contend that the scope of the fiduciary duties and obligations of officers and directors should be broadened to include creditors. In particular, the authors call on bank directors to take solvency risk explicitly and systematically into account when making decisions or else face personal liability for failure to do so.
NY Code - Article 5: FOREIGN BANKING CORPORATIONS AND NATIONAL BANKS

Section 200 When foreign banking corporation may transact business in this state Section 200-A Actions maintained by a foreign banking corporation Section 200-B Actions maintained against foreign banking corporation; residents; foreign corporations, foreign banking corporations as non-residents Section 200-C Maintenance of books, accounts and records Section 201 Conditions to be complied with by foreign banking corporations applying for initial license Section 201-A Rights and privileges of foreign banking corporation under license; effect of revocation Section 201-B Fiduciary powers of foreign banking corporations Section 201-C Notice of acquisition of control or merger Section 202 Rates of interest; installment obligations; personal loan departments; effect of usury Section 202-A Restrictions on receiving deposits Section 202-B Maintenance of assets in this state Section 202-C Reserves against deposits Section 202-D Foreign banking corporation may not maintain both agencies and branches in this state Section 202-F Restrictions on loans, purchases of securities and total liabilities of any one person to New York branch or agency of foreign bank Section 202-G Succession to agency by branch and to branch by agency Section 202-H Repayment of deposits standing in the names of minors, trustees, joint depositors or custodians; interpleader in certain actions

Section 202-I Safe deposit business of branches Section 202-J Power to act as trustee under self-employed retirement trust or individual retirement trust Section 203 Change of location, name or business Section 204 Reports of foreign banking corporations; penalties Section 204-A Payment of claims by foreign banking corporations where adverse claim is asserted; effect of claims or advices originating in, and statutes, rules or regulations purporting to be in force in occupied territory; performance of contracts and repayment of deposits performable or repayable at foreign offices of foreign banking corporations Section 206 Termination of existence Section 207 Service of process on unlicensed corporation formed under laws other than the statutes of this state Section 208 Nondiscriminatory treatment of insured state banks and national banks Section 209 Restrictions on executive officers of foreign banking corporations and national banks http://codes.lp.findlaw.com/nycode/BNK/5 http://wakeup-world.com/2013/02/18/all-corporations-banks-and-governments-lawfully-foreclosedby-oppt/ CORPORATIONS S Banks: Should Banks Convert To S Corporations?
April, 2000 4 N.C. Banking Inst. 627

Author
Michael Duane Jones

Excerpt

I. Introduction In 1996 Congress passed the Small Business and Job Protection Act which, among other things, for the first time allowed banks and other financial institutions to qualify for S corporation tax status. 1 S corporation status has been available for other types of small businesses and has allowed for considerable reductions in income tax paid. 2 One reason that banks were prohibited from filing as S corporations was that "they were already given a substantial tax break by being allowed to use methods of accounting for bad debts that were more generous than those permitted other taxpayers." 3 These provisions were designed to provide banks with the ability to make loans to the public by protecting them from the potential for large losses. 4 Eventually, however, Congress began to remove some of these provisions. 5 Banks could not receive the benefits other corporations enjoyed, nor were they able to compete on an equal level with other financial institutions, like credit unions or thrifts, which are tax exempt institutions. 6 The Small Business Act helped level the playing field for banks. This article will explore the most important benefit, tax savings, for a bank that elects the S corporation

tax status and decides to become an S bank. 7 Then the article will set out the four main requirements to qualify for S corporation status: number of shareholders, types of shareholders, limits on classes of stock, and limits on the methods of accounting for bad ...

S Corporation Banks Beware

While most banks and their directors are generally aware of the tax benefits of an S election, there are some potential disadvantages. One disadvantage is the potential for S elections to encounter additional volatility to the equity account and lower capital ratios relative to C corporations when losses are incurred (all else equal). When banks are profitable, the impact of the tax election on equity for S and C corporation banks is relatively muted as both pay out a portion of earnings to cover taxes either in the form of a direct payment of the federal tax liability as a C corporation or in the form of a cash distribution to shareholders to cover their portion of the tax liability as an S corporation. However, S corporations are typically limited relative to C corporations in their ability to recognize certain tax benefits when losses occur. The equity accounts of most C corporations benefit from the ability to recognize tax loss carrybacks and deferred tax assets following the occurrence of losses, which serve to soften the direct impact of the loss on capital. S corporations are generally precluded from any tax benefit after the recognition of losses and the resulting loss is directly deducted from equity. A few nasty quirks of book and tax income can make the situation even worse for shareholders and the S corporation bank. To help illustrate the point further, consider the following example which details how losses realized as an S corporation can flow directly through to equity without the tax benefit recognized by a C corporation. As detailed below, the capital account of the S corporation was impacted more adversely following the recognition of losses than the C corporation (all else equal).

In a recent survey of bank transaction activity nationwide conducted by Mercer Capital, we noticed some evidence of this disadvantage surfacing among S corporation banks. Of transactions (whole bank sales) involving target banks with assets between $100 million and $1 billion announced since June 30, 2008, the majority of S corporation banks sold were distressed, defined as either having non-performing assets as a percentage of assets greater than 3.0% (three out of four transactions involving S corporation targets) or reporting a loss in the most recent year-to-date period (two out of four transactions involving S corporation targets). This trend is

illustrated more fully in the chart below and is notable especially when compared to transaction activity of C corporations over this period.

We found some additional evidence that S corporation banks may be experiencing the detrimental impact of additional capital volatility in a review of bank failures. Of 8 total S corporation bank failures since 1998, five have occurred since January 1, 2008, with three occurring since December 1, 2008. While it is too early to tell whether this evidence of increased transaction activity and failures among distressed S corporations is purely a coincidence or early indications of an emerging trend of capital volatility for S corporation banks, this analysis prompted a number of questions: Should a conversion to a C corporation be considered by an S corporation prior to recognizing losses? Should a conversion to a C corporation be considered even if no immediate losses are expected as a matter of conservatism? Should the exploration of acquisition possibilities by S corporations be accelerated prior to recognizing losses so that a C corporation buyer could recognize any tax benefits potentially unavailable to the S corporation or its shareholders? Should S corporations be managed more conservatively than C corporations given the added potential for volatility in the capital account? Should an increase in merger and recapitalization activity, bank failures, or conversion back to C corporations among troubled S corporation banks be expected for the remainder of 2009 and beyond? Do the shareholder limitations of S corporations limit their ability to raise capital, thereby forcing a distressed S corporation bank to pursue merger partners when substantial losses arise? If your bank is dealing with any of these issues, feel free to give us a call to discuss the situation confidentially.

To the Foreign Banking Corporation Addressed: As recent events have demonstrated, the corporate structures currently being used to facilitate mergers and other consolidations among foreign banking corporations vary widely, depending upon the nature of the transaction. In some cases, a new legal entity is formed to assume the banking operations of one or more foreign banking corporations which maintain a licensed branch or agency in New York. In this letter, the Banking Department is taking the opportunity herein to clarify the circumstances under which a branch or agency license application under section 200 of the New York Banking Law, or a representative office license application under section 221-a of the New York Banking Law, is required to be filed and approved before the "successor" corporation may continue the banking operations of a "disappearing" foreign banking corporation which held such a license. Section 200 of the New York Banking Law requires that a license be obtained by a foreign banking corporation in order to establish and maintain a branch or agency in New York. The issuance of such license is approved by the Banking Board. Section 221-a of the New York Banking Law requires that a license be obtained by a foreign banking corporation in order to establish and maintain a representative office in New York. The issuance of this form of license is approved by the Superintendent of Banks ("Superintendent"). For each type of office, additional locations of the type already licensed may be established upon notice to the Superintendent. See New York Banking Law, 200 (for branches and agencies) and 221-a ( for representative offices). In addition, a foreign banking corporation which already is licensed to operate a branch, agency or representative office in New York shall file a notice with the Superintendent no later than fourteen days after

such foreign banking corporation either becomes aware of any acquisition of control of such organization, or merges with another foreign banking corporation. See New York Banking Law, 201-c (for branches and agencies) and 221-i (for representative offices). If the legal entity holding the current license issued to the foreign banking corporation by the Banking Department will continue to operate the office after the closure of the merger or change of control transaction, then in the absence of unusual circumstances, a notice to the Superintendent pursuant to sections 201-c or 221-i would be sufficient. Such notice should describe in detail the transaction, effective dates and any changes in business plans for the State-licensed New York offices of the foreign banking corporation as a result of the transaction. In the situation where a merger transaction is to take place among two (or more) foreign banking corporations that each maintain State-licensed branches, agencies or representative offices in New York, then a notice pursuant to section 201-c or 221-i, as the case may be, would be required from each of the foreign banking corporations maintaining a State-licensed office. If applicable, it would be expected that the notice filed by the surviving foreign banking corporation would include a notice of intent to maintain the offices of the merged foreign banking corporations as offices of the surviving foreign banking corporation. If, however, the result of a corporate consolidation among foreign banks is the assumption of the operations of a State-licensed New York office by a successor foreign banking corporation that is not authorized to operate such an office in New York, then the successor foreign banking corporation must file a branch, agency or representative office application, as the case may be, and receive approval, prior to the closure of the transaction and the assumption of the operations of that office. The result is the same whether the successor foreign banking corporation already is in existence or a new foreign banking corporation is created to facilitate the merger. If no such approval has been obtained, then the successor foreign banking corporation will be considered to be operating unlawfully and subject to substantial penalties. It must be emphasized that each foreign banking corporation operating in New York, even a new one created to succeed to the business of two foreign banking corporations otherwise authorized to operate in New York, must have its own license to operate the particular office that is established ; otherwise such foreign banking corporation is deemed to be operating in violation of section 200 and/or section 221-a of the New York Banking Law. The Banking Department urges each of its foreign banking corporation licensees to keep the Department aware of major events affecting the foreign banking corporation. Even if only an after-the-fact notice ultimately is required, in order to assure itself that an application is not required pursuant to section 200 or 221-a of the Banking Law, it is strongly recommended that the management of a foreign banking corporation contact the Banking Department as soon as it is aware of a pending transaction so that the Banking Department and the foreign banking corporation may determine the appropriate notices and/or applications that will need to be filed. This letter is intended only as general advice and is not intended to cover every variety of merger, consolidation or change of control transaction that may occur. Foreign banking corporations, or their counsel, should contact the following staff if there are any questions or comments: in the Foreign Commercial Banks Division: Deputy Superintendent of Banks Robert H. McCormick, 212-618-6486 (phone), 212-618-6926 (fax); or in the Legal Division: Deputy Superintendent and Counsel Edmund P. Rogers III, First Assistant Counsel Arthur Gelman or Assistant Counsel Kathleen A. Scott, all at 212-618-6591 (phone) or 212-618-6912 (fax). Sincerely,

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Corporations based in emerging market countries have increased their global borrowing substantially in recent years, putting themselves at risk to a sudden shift in investor sentiment and a turn in the global credit cycle, according to an analysis by the World Bank.

Private and state-owned corporations in developing countries raised an unprecedented $333 billion through syndicated bank loans and international bond issuance in 2006, up sharply from $88 billion in 2002, according to World Bank staff estimates based on data from Dealogic. The rapid growth in external debt contracted by these companies over the past four years may represent a trend whose potential implications are not yet well understood, the World Bank says in its annual report, Global Development Finance 2007, released in late May.

Companies and banks in emerging markets are taking advantage of favorable conditions as well as much more liberal financial regulations to come to the markets in quite a massive way, says Mansoor Dailami, manager of international finance in the World Banks Development Prospects

Group and lead author of the report. Access to global capital markets allows these corporations to diversify their sources of funds, improve risk management through more sophisticated financing instruments, borrow at longer maturities, and reduce their cost of capital, Dailami says. As emerging market corporations have increased in size and expanded their international operations, however, they have increased their exposure to interest-rate and currency risks, the report says.

Despite advances in risk management by many firms, concerns remain in two particular areas that are reminiscent of the position of emerging market corporations immediately before the East Asian financial crisis of 1997-1998, the report says. First, growing Japanese yen-denominated liabilities held by some corporations may not be adequately hedged against currency movements or a sudden unwinding of the yen carry trade. Because even a modest appreciation of the yen could significantly weaken corporate balance sheets, debt-equity ratios and the cost of debt financing may be significantly underestimated unless foreign exchange risks have been hedged, the World Bank report says.

Second, market participants have raised concerns over weak credit-risk management in emerging market corporations, the report continues. Because derivatives markets are not well developed in some of these countries, it is difficult for these companies to develop an enterprise-wide riskmanagement framework and to measure, aggregate and hedge risk. Moreover, credit risk may be substantially underestimated during the current peak of the credit cycle.

corpfinance_corpdebt01Currency Exposure Meanwhile banks exposure to foreign-currency borrowing should be given special attention, the report says. Several countries, particularly in the transition economies of Europe and Central Asia, are now experiencing a credit boom, spearheaded by banks of untested financial health and stamina, the report says. Concerns are growing that some of these banksparticularly in Estonia, Hungary, Kazakhstan, Latvia, Lithuania, Russia and Ukraineare increasing their foreign exchange exposure to levels that have the potential to jeopardize financial stability, it says.

Market-determined exchange rates, far greater corporate transparency and government regulation of foreign borrowing by banks are needed to reduce the likelihood of excessive corporate foreign borrowing and financial distress, the World Bank report says. It warns that boom-and-bust cycles can have dire consequences and that excessive corporate borrowing could limit the host governments capacity to issue sovereign debt on international markets.

Corporate debt issues have grown bigger, which has brought greater liquidity to secondary markets and stimulated the development of a market for credit default swaps on emerging corporate debt, the report says. These swaps are marketed to global investors, particularly hedge funds and

insurance companies that want to increase their exposure in emerging markets without having to invest directly in the underlying assets.

Are Spreads Realistic? Meanwhile, the spread of corporate bond issues from emerging market borrowers over those of comparable US treasury securities has narrowed from about 452 basis points in 1999 to about 349 basis points in 2006. With global financial markets operating in recent years with unprecedented liquidity, heightened risk appetite among investors, and a spectrum of new players and actors, the possibility of corporate credit spreads underestimating their long-term equilibrium levels is a real one, the World Bank report says.

Growth in the global economy is moderating, and financial markets are signaling a turn in the financing conditions facing the developing world, the bank says. While most developing countries have clearly improved their ability to deal with the moderate shocks that may accompany changes in the international credit environment, and while a smooth adjustment is most likely, turning points are risky in nature, it says.

Global gross domestic product expanded 4% in 2006, which probably represents a cyclical peak, with growth expected to slow to about 3.5% in 2009, the World Bank says. The expansion of developing economies is projected to moderate gradually from 7.3% in 2006 to about 6% in 2009, due to rising interest rates and developing capacity constraints.

corpfinance_corpdebt02Coherent Approach As capital markets have integrated rapidly over the past few years and as developing-country corporations have been raising funds overseas, the need for a more coherent global approach to regulating cross-border public offerings and listings of securities has become more urgent, the report says. It calls for regulators and governments to pay more attention to the transparency and quality of accounting standards.

Equity flows accounted for almost three-quarters of capital flows to developing countries last year. Net private capital flows to emerging market countries rose 17% to a record $647 billion in 2006, but the rate of growth in these flows slowed from 34% in 2005. What were seeing now is a leveling off of these increasing capital flows, Dailami says. The projected slowdown in global growth, driven in part by a downturn in the United States and reinforced by tighter monetary policy in high-income countries, could make financing conditions for developing countries somewhat less favorable in coming years, he says.

Due to high levels of liquidity and the chasing of yield, we are seeing a lack of differentiation in the pricing of various financial assets in global markets today, says William Rhodes, president and CEO of Citibank and senior vice chairman of Citi. Speaking at the spring membership meeting in Athens of the Washington, DC-based Institute of International Finance, of which he is senior vice chairman, Rhodes said, The time has assuredly come when investors need to differentiate much more carefully between various types of risks, and to price risks according to fundamentals.

Rhodes added, At the same time, given the market vulnerabilities that now exist, the governments of a rising number of emerging market economies need to maintain sound economic policies and pursue needed structural reformsin some cases these have been postponed for much too long.

corpfinance_corpdebt03High-Yield Issuance Rises Kingman Penniman, president and chief executive of high-yield bond research firm KDP Investment Advisors, based in Montpelier, Vermont, says, Ultimately, we do expect to see a general repricing of risk. Spreads of high-yield issuers to treasury bonds are still close to historical lows, and issuance remains robust, he says.

New high-yield bond issues in the US market totaled $23.5 billion in May, second only to the $27.2 billion monthly record set in November 2006. This pales in comparison to the $180 billion in leveraged loans that are expected to come to market in the next month or two, Penniman says. Most of these loans are related to leveraged buyouts of corporations. There seems to be a sense in the market that now is the time to get your deals done before liquidity dries up, he says. So far, the appetite is still there to meet the demand.

The yield on the 10-year US treasury bond rose to 5.31% on June 12, the highest level in more than five years. There were no specific data accounting for the rise in bond yields, according to Penniman. It was the culmination of a lot of things, including a realization that the US economy is going to be stronger than some thought. A number of economists threw in the towel on predicting a US rate cut, and members of the Fed remain pretty hawkish in their testimony, he says.

Meanwhile, the Treasurys 10-year bond auction in June attracted indirect bids, which are a proxy of foreign central bank buying, of just 10.9% of the total, down from 44.3% at the previous 10-year auction in May. This raised concern that central banks of Asia and Middle Eastern oil-producing countries are finding other investments for their rising foreign exchange reserves.

corpfinance_corpdebt04

Read more: http://www.gfmag.com/archives/38-38-july-2007/1118-corporate-finance-emergingmarket-companies-and-banks-pose-risks-to-financial-system-with-global-borrowingspree.html#ixzz2jPYzJCXo

Banks and Transnational Corporations that Run the World

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters' worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. The study's assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable. The idea that a few bankers control a large chunk of the global economy might not seem like news to New York's Occupy Wall Street movement and protesters elsewhere (see photo). But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world's transnational corporations (TNCs). "Reality is so complex, we must move away from dogma, whether it's conspiracy theories or free-market," says James Glattfelder. "Our analysis is reality-based." Previous studies have found that a few TNCs own large chunks of the world's economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy - whether it made it more or less stable, for instance. The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company's operating revenues, to map the structure of economic power. The work, to be published in PLoS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What's more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world's large blue chip and manufacturing firms - the "real" economy - representing a further 60 per cent of global revenues. When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. "In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group. John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability.

Concentration of power is not good or bad in itself, says the Zurich team, but the core's tight interconnections could be. As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates." "It's disconcerting to see how connected things really are," agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank. Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system's behaviour, he says, requires more analysis. Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit overconnection among TNCs. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk. One thing won't chime with some of the protesters' claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. "Such structures are common in nature," says Sugihara. Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, "is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups". Or as Braha puts it: "The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy." So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest. When this article was first posted, the comment in the final sentence of the paragraph beginning "Crucially, by identifying the architecture of global economic power" was misattributed.

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Banks and large corporations can use huge losses to reduce corporation tax payments
Audits show some multi-nationals cutting tax bills through incorrect use of tax credits Banks and large corporations will be able to use massive losses they accumulated during the economic crash to write off billions of euro they owe in corporation tax over the coming years. Under tax legislation, corporations can write off losses against tax liabilities for an indefinite period of time. Revenue Commissioners internal documents show there is concern that the scale of losses a practice known as loss buying could significantly affect future tax revenue.

Undeclared rental income targeted in Revenue crackdown

Revenue questions whether child benefit can be taxed if children legally own the payment

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As a result, the Revenues large cases division is monitoring any evidence of aggressive tax planning among the largest corporate groups and financial services companies. Just 10 companies are responsible for about 96 billion of unused losses that can be used to reduce their tax bills. They are not named in the documents but include a treasury company and several banks. Income from corporation tax has fallen significantly over recent years. It peaked at 6.4 billion in 2007 and has fallen every year to 2011, to a low of 3.5 billion. It recovered in 2012 to 4.2 billion. The State is heavily dependent on relatively few companies for this income. For example, the top 100 corporation tax payers in 2011 contributed 80 per cent of the tax take. Latest available figures show that by the end of 2010 there was an estimated 119 billion in unused losses that could be set against future profits. This was an increase of 70 billion on 2009. The increase was due to companies significantly underreporting losses for earlier years, as they were not obliged to include total cumulative losses in their corporation tax returns. They were allowed to report just the amount of losses for which relief was being claimed during the accounting period. The Revenue has since amended its corporation tax return forms to insist that companies provide information on their total losses. Documents show officials are uncertain about how much the exchequer may lose over the coming years as a result of companies using their losses to reduce their tax bills. It is difficult to estimate the extent to which losses will impact on future corporation tax receipts as the use of losses depends critically on the capacity of companies to generate profits to absorb their losses, one document states. This will vary from sector to sector and some companies will not be able to fully utilise their losses because of insufficient profits or because they go out of businesses.