BANKS:MINISTER FOR Finance Brian Lenihan did a U-turn yesterday on taxing bankers' bonuses in an attempt to secure the passage of the Finance Bill this week.
The Minister is expected to table amendments today that will allow for some form of tax to be levied on these bonuses.
The change of heart followed representations by Independent TDs Michael Lowry and Jackie Healy-Rae, who sought the inclusion of this measure, and others, in the Finance Bill in return for their support.
Mr Lenihan proposed in December’s Budget to introduce a 90 per cent tax rate on bankers’ bonuses.
But it was dropped from the Finance Bill due to difficulties in framing the legislation in the shortened time frame brought about by the Green Party’s decision to leave Government and the Opposition’s push for an election.
One option being examined by the Department of Finance was an extension of the new universal social charge (USC) as a means of taxing the bank bonuses.
The USC has combined the old health and income levies and is applied to gross income.
The department confirmed yesterday that the tax on bankers’ bonuses will apply only to Irish institutions covered by the bank guarantee.
It will exclude foreign-owned banks and those operating in the IFSC.
Many commentators had argued that such a punitive tax on overseas institutions might dissuade foreign direct investment in Ireland.
The Irish Banking Federation declined to comment yesterday on the proposed tax.
Mr Lowry said it was “appalling and unacceptable” that the bonuses were not to be dealt with in the Finance Bill.
He said it was a “massive contradiction” to ask workers to pay higher taxes while banks, supported by State funding, were “paying out bonuses to staff”.
Fine Gael’s finance spokesman Michael Noonan said there was “no divergence of opinion” among the parties on the tax on bankers’ bonuses.
He said Fine Gael and Labour had accepted the Minister’s explanation this week that the necessary legislation might not be completed in time for the Finance Bill, but that the measure could be put into effect by the new government shortly after taking office.
The bonus issue blew up late last year when it emerged that AIB and Bank of Ireland had paid millions in bonuses to a large number of staff since 2008.
