Banking customers could be hit with higher fees, increased mortgage rates, or lower deposit rates if bailed out banks are forced to start repaying taxes, a report warns.

AIB, Bank of Ireland, and PTSB escaped paying €233m in tax last year, the Department of Finance report finds, under a system that allows them to carry forward losses from the financial crash.

The review of exemptions for lenders means that the three bailed-out banks are now likely to be allowed continue to pay zero tax on billion euro profits for years to come.

The Irish Examiner has obtained the report, carried out by Finance Minister Paschal Donohoe’s department, on the potential consequences of changes to the treatment of corporation tax loss relief for banks.

It examined the size of tax losses not paid by banks under the current system and what would happen if those lenders saw those reliefs scrapped.

The Fine Gael-Labour government in 2014 changed the law to allow bailed-out banks use all losses incurred in previous years to be offset against profits, gifting the lenders huge deferred tax assets.

Last year, Bank of Ireland, AIB, and PTSB made combined profits of €2.5bn. But they paid no taxes.

Opposition TDs asked the minister to consider the tax- free status and any changes for the banks.

But the Department of Finance report effectively lets the lenders off the hook.

The report warns that withdrawing their tax-free status would damage the State’s investments. The value of State shares in all three would fall by €418m.

Crucially, Mr Donohoe’s officials warn that consumers could be badly hit: “From a consumer perspective, increased costs and reduced competitiveness in the banks as a result of a restriction on loss relief could potentially lead to pricing increases or reduced services.

This could have a negative impact on consumers — for example through increased fees, increased mortgage interest rates, or reduced lending to Irish businesses — or on employment in the Irish banks if cost-cutting measures are required.

“A wider tax loss restriction for all banks operating in Ireland would have similar impacts on the capital position of the banks in partial State ownership, and similar pricing issues for consumers.

“In the longer term it could lead to a reduction in the level of investment and/or competition in the sector as a whole,” said the report.