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Lenihan Announces Super Tax On Irish Bankers

by Jason Gorringe,, London

14 December 2010

The Irish Minister for Finance, Brian Lenihan on December 9 announced that the government would be pushing through legislation to enforce a prohibitive 90% tax on the bonuses of banking sector employees in state-supported banks, following an announcement by partially state-owned Allied Irish Bank that it is to pay EUR40m in retrospective bonuses.

The tax however, Lenihan explained, will not be enforceable until next year, allowing 2,400 Allied Irish Bank employees from its Capital Markets division to receive bonuses totalling EUR40m. AIB’s announcement comes despite an agreement with the government in 2008 that bonuses would not be disbursed. The AIB employees won a ruling in the High Court to receive bonuses relating to their performance in 2008.

Making the announcement when speaking on Irish radio, Lenihan said:

“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% rate of charge on any... bankers' bonuses.”

In a statement to employees on December 9, AIB’s Executive Chairman, David Hodgkinson, stated: “Whilst this is legally required of us, it reflects the past and is not the way we intend to conduct ourselves in future.”

“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,” he added.

The Irish taxpayer owns 19% of the bank, the government having pumped in a total of EUR3.5bn since the start of the crisis to ensure the bank's viability. It is anticipated as part of further support, financed by the recent multilateral financial assistance provided to Ireland including by the European Union and the International Monetary Fund, that the bank may receive a further EUR6.5bn in order to shore up its finances.

TAGS: tax | business | Ireland | fiscal policy | banking | employees | international financial centres (IFC) | offshore | legislation | individual income tax

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