Sat, Dec 11, 2010 - Page 10 News List

Irish government seeks to tax bank bonuses at 90%

O’THIEVERY:Politicians are up in arms about reports that Allied Irish Bank, which needs capital, is going to payout 40 million euros in additional compensation

Reuters, DUBLIN

Irish Finance Minister Brian Lenihan said on Thursday he would impose a 90 percent tax on bankers’ bonuses, in a move to try to silence critics who have said the banking sector drove Ireland into the ground.

“As far as the future is concerned, I do propose to introduce the amendment to the finance bill to put this matter beyond any doubt and provide a high rate, a 90 percent rate of charge on any ... bankers’ bonuses,” Lenihan told a local radio station.

Lenihan was referring to a bill that is the fourth in the series of a vote on the budget, which is expected to be ruled on in the Irish parliament early next year.

The Irish Independent reported on Thursday that Allied Irish Bank PLC would pay out 40 million euros (US$52.8 million) in bonuses to its executives.

Local media said that would not be subject to Lenihan’s proposed charge since the bonuses were for work done in 2008. Once the state’s largest listed lender, Allied Irish is facing a majority state ownership because of additional capital requirements.

The opposition center-right Fine Gael Party, which is likely to lead the next coalition government after an election next year, said a tax should apply to the Allied Irish bonus.

“We want them taxed at 99 percent because we believe it’s immoral to use taxpayers’ money that was used to bail out the banks to pay bonuses,” Fine Gael deputy leader James Reilly told Irish television.

“Let me make this clear, they’re entitled to be paid it, we’re entitled to tax it,” he said.

Irish banks’ big bonus culture and token boardroom oversight fueled a disastrous property bubble that brought the sector to its knees and forced the state to seek an 85 billion euro bailout from the IMF and EU.

Former Irish Nationwide Building Society chief executive Michael Fingleton retired a year ago with a controversial 1 million euro bonus, and former executives at collapsed Anglo Irish Bank, some of whom have fled overseas, have become hate figures in the media.

Ireland’s central bank told lenders earlier this month to overhaul pay practices and link bonuses to sound risk management or face fines and disqualification for individual executives.

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