February 3, 2020 / 4:57 PM / 13 days ago

No return of bank bonuses, favorite for Irish finance minister says

DUBLIN (Reuters) - Fianna Fail, the party leading polls ahead of Saturday’s Irish election, would retain state-imposed curbs on bankers pay and bonuses if elected, the favorite to become Ireland’s next finance minister told Reuters on Monday.

Michael McGrath Fianna Fail spokesperson on finance is pictured in Dublin, Ireland February 3, 2020. REUTERS/Lorraine O'Sullivan

Ireland capped executive pay at 500,000 euros a year ($552,300) during the euro zone’s costliest banking rescue a decade ago. It also banned all forms of variable pay and fringe benefits for even junior bank staff, restrictions lenders complain impedes them in attracting and retaining talent.

Fianna Fail finance spokesman Michael McGrath said banks had to fully deal with a years-long mortgage overcharging scandal and parliament introduce laws to make senior bankers accountable for such failings before he would consider the matter.

“It would be indefensible to lift caps and enable huge bonuses at a time when the banks are being investigated for misbehavior,” said the 43-year-old accountant, who is seeking re-election in the southern city of Cork.

“We have had a history in the Irish banking system whereby bonuses were paid on the back of lending volume — much of it was inappropriate lending that never should have taken place. We have been badly burned and I think we have to tread very carefully.”

McGrath said he would examine how Ireland’s banks avail of corporation tax loss relief if he became finance minister but would not make any changes that would leave the state worse off by impacting the majority state-owned lenders’ capital or value.

He said he would retain the 150 million euro annual levy paid by the banks at the current level.

TAX VETO

McGrath, the main opposition finance spokesman in parliament since 2011, could be taking over the top job while new global rules are finalised into how multinational firms pay corporate tax — a direct threat to Ireland’s low 12.5% rate that has helped attract some of the world’s biggest companies.

Like the current government, Fianna Fail would strongly oppose an EU-wide tax on big internet firms in favor of the global reforms being sought by the Organisation for Economic Cooperation and Development (OECD).

“We believe that fair tax competition needs to be protected and that’s our bottom line going into any discussions. There is a veto at EU level, we would uphold that and not allow Ireland’s corporate tax rate or regime be decided at EU level,” he said.

“I believe that retaining a corporate tax advantage is imperative for Ireland. It is not the only reason why we have close to a quarter of a million people directly employed by multinationals but tax has been central to our success and to say otherwise would be misleading.”

McGrath’s party, which shares similar policies on Brexit and the economy with the ruling Fine Gael, has led in every opinion poll this year. It hopes to form a coalition with smaller parties but not surging Irish nationalists Sinn Fein, whom it refuses to govern with.

Most analysts say another “confidence and supply” minority government deal with Fine Gael, this time with Fianna Fail leading, is the most likely outcome. McGrath fears such an arrangement would struggle “to stand the test of time.”

“On the current poll figures (forming a government) would be a challenge, for everyone,” he said.

($1 = 0.9053 euros)

Reporting by Padraic Halpin; Editing by Catherine Evans

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