Banker's bonus tax to be imposed

 

Minister for Finance Brian Lenihan said today he would impose a 90 per cent 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 per cent rate of charge on any ... bankers' bonuses," Mr Lenihan said.

The changes will not affect the €40 million in bonus payments to be paid to Allied Irish Bank executives before Christmas.

Earlier the executive chairman of AIB said the issuing of bonuses to staff reflected the lenders past.

David Hodgkinson made the comment in a message to staff this morning.

“Whilst this is legally required of us, it reflects the past and is not the way we intend to conduct ourselves in future,” he said.

The bonuses relate to deferred payments in respect of 2008 which are being paid to some staff. A High Court ruling last month compelled AIB to pay €10 million in backdated bonuses to approximately 90 employees in its Capital Markets division. This figure is now reported to have quadrupled.

“The issues we are facing mean that the bank currently relies on government and taxpayer support and I am working to ensure that, in future, our pay and benefits policy is more reflective of our organisation's responsibilities, performance and of the economic climate in general,” Mr Hodgkinson said.

AIB ceased paying bonuses after a Government-appointed committee recommended no bonuses be paid for 2008 and 2009. After legal actions were initiated by overseas capital markets staff, however it did pay what the bank called “contractual bonus entitlements”.

The Government has so far pumped €3.5 billion into AIB to help it cope with its loan losses, but this figure may rise to €9 billion.

Green Party finance spokesman Senator Dan Boyle described the bonuses as outrageous. He said Minister for Finance Brian Lenihan should include a special provision in the forthcoming Finance Bill for a prohibitively high tax rate on bank executive bonuses.

“I believe a 90% rate would be justified in these circumstances,” he said.

Fine Gael deputy leader James Reilly TD and banking spokesman Damien English TD said a 99 per cent super tax should be applied to bankers’ bonuses.

“The US, the UK and France brought in similar measures to tackle the ongoing greed and profligacy of corporate fat cats,” Mr Reilly said.

Fianna Fáil TD for Dublin South East Chris Andrews said bank bonuses should not be paid but that if they have to be they should be given in shares linked to the performance of an institution.