Bankers face 90pc tax on bonuses in Republic of Ireland
Published 21/01/2011 | 04:55
Irish finance minister Brian Lenihan is to push ahead with his plan to impose a 90pc tax on bankers' bonuses when the Republic's Finance Bill is published today.
The bill will also contain a clause allowing the Irish government to tax AIB officials who are taking legal action for the payment of bonuses promised to them almost two years ago.
AIB is facing up to 100 claims after staff from the bank's capital markets unit filed claims with both the High and Circuit Courts for sums ranging from €3,000 to more than €100,000.
But if implemented, the controversial new tax means such legal action could be pointless as the new tax would wipe away any award they may win.
The Government believes it can apply the tax even though some tax experts say the AIB staff could claim the payments are being deferred from 2008 and therefore such "retrospective" tax would be unlawful.
The decision to slam bankers with the bonus tax comes after the two main banks embarrassed Mr Lenihan by awarding individual employees bonuses worth hundreds of thousands of euro.
AIB said last month it would pay the backdated bonuses to around 90 traders following a High Court ruling which the bank did not contest.
The bank was then forced into a U-turn after Mr Lenihan told it in a letter that the payments could not be made.
Meanwhile, Bank of Ireland (BoI) is under a Department of Finance investigation for allegedly misleading it about the size of bonuses awarded to some executives.
Chief executive Richie Boucher admitted last week that information supplied to the Dail on bank staff bonuses was wrong.
Mr Lenihan said BoI had not taken account of contractual bonuses ''which probing by my department revealed did, in fact, have a performance element''.
Bonuses of €44m have been paid to staff at financial institutions in 2008 to 2010. A further €20m was given to Anglo Irish Bank employees, according to information supplied by Mr Lenihan to Labour Party finance spokeswoman Joan Burton.
A bonus of around €500,000 was awarded to a single executive at BoI and further bonuses were awarded to others, according to information obtained by the Irish Independent.
Ireland is one of the few English-speaking countries which has so far avoided implementing a specific tax on bonuses.
Former British finance minister Alistair Darling introduced a one-off 50pc tax on bonuses in December 2009 which is set to generate around £2.5bn (€3bn) to help finance measures to tackle youth unemployment.
US President Barack Obama appointed Washington lawyer Ken Feinberg, as a 'pay tsar' with power to order companies that had received "exceptional assistance" to cut the size of bonuses.
Switzerland and Germany have also limited bonuses. However, none have suggested a tax rate as penal as 90pc.
Meanwhile, in advance of the bill, property investors have lobbied hard for changes to the Budget proposals on the so-called Section 23 tax reliefs.
Many small property investors face heavy losses from the ending of €300m in tax breaks, but it is not clear whether the Finance Bill will amend the controversial proposals.