Irish government drops 90% bank bonus tax

26 January 2011

The Irish government has scrapped controversial plans to tax banking bonuses at 90 percent in a bid to rush through new legislation before parliament breaks up, it has emerged.

Finance minister Brian Lenihan confirmed yesterday (January 25th 2011) that the administration was facing a race against time to get its latest finance bill ratified by the Dail Eireann prior to the end of this week.

"It is not possible with the new regulatory timetable," a spokeswoman explained. "All the various proposals would have been run by the attorney general, who would have to ensure that the legislation was appropriate."

In the event, the laws were passed by the Dail by a narrow majority of 80 votes to 77 at its second reading, ahead of the general election which is expected to take place at some point next month.

The bill - a legislative commitment stipulated by the terms of the EU/International Monetary Fund bailout package - will now be reviewed at the committee stage and must be written into the statute book by the end of March.

Allied Irish Banks' (AIB's) announcement that it was to pay executives €40 million ($54.6 million) in performance-related remuneration sparked a public outcry and initially led Mr Lenihan to propose the introduction of the 90 percent levy.

The minister moved to cancel the bonuses altogether as part of the financial institution's nationalisation, but some employees of AIB Capital Markets instigated legal action and it will be left to the next government to resolve the dispute.

However, Ireland has been struck by political unrest in recent weeks and the future of the existing coalition looks grim, with Taoiseach Brian Cowen this week resigning as leader of Fianna Fail, the partnership's senior party.

The Irish Times reported yesterday that AIB was poised to delist from stock exchanges in Dublin, London and New York, with stocks in the bank instead being traded on the Enterprises Securities Market.

By Asim Shah

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