Lenihan to tax bankers' bonuses at 90% but 2008 payouts escape
IN FUTURE 90 per cent of the bonuses paid to senior Irish bankers will be recouped by the exchequer in tax, Minister for Finance Brian Lenihan announced last night.
He told the Dáil he intended to amend the Finance Bill, giving effect to budgetary measures, to ensure a 90 per cent charge on bank bonuses when the Dáil debates the measure in January.
“This should copperfasten this matter, and put it beyond any doubt whatsoever,” the Minister said. He was responding to reports that AIB bank executives would share €40 million in bonuses deferred since 2008.
“Legislation brought in on foot of the bank guarantee already prohibits the payment of any performance bonuses to senior bank executives. No bonuses have been paid to bankers for 2009 or for 2010,” Mr Lenihan noted.
He welcomed the clarification by the new executive chairman of AIB, David Hodgkinson, who told staff the payments disclosed yesterday reflected the past, and this was not the way the bank intended to conduct itself in the future.
“To copperfasten this restriction I will include an amendment in the upcoming Finance Bill to introduce a 90 per cent tax rate on any future banker’s bonus in all guaranteed institutions,” Mr Lenihan added.
However, the legislation will not apply to €40 million in bonuses being paid for 2008 because legislation cannot be retrospective. The High Court has ruled the bankers were legally entitled to the sum, regardless of the disastrous performance of AIB which led to the introduction of the bank guarantee on September 30th of that year.
Shortly before Mr Lenihan’s announcement Green Party finance spokesman Dan Boyle called on him to include in the Finance Bill a special tax rate at a prohibitively high level on bankers’ bonuses.
“I believe a 90 per cent rate would be justified in these circumstances. It is outrageous that we continue to have such flagrant action from financial institutions whose operations and behaviour have done so much to create the economic climate in which we now find ourselves,” Mr Boyle said. Earlier, Fine Gael deputy leader James Reilly called on the Government to recoup the bonuses by means of a 99 per cent tax rate.
“In the United States, President Obama taxed them at 90 per cent, and the Government here should show some leadership and go further. The people want that,” he said.
European Commission chief José Manuel Barroso said the EU executive wants “clear conditionality” in the bonus schemes for high-ranking staff at AIB. He said the decision stemmed from the “Irish courts” and not from AIB. “It seems to be about legacy bonuses which predate the aid that has been given to AIB,” he told reporters.