The banks. A song likely to make Corkonians misty-eyed; otherwise the term likely to earn a spit in the eye from Sean and Mary Citizen and, on their behalf, from many of their public representatives. The banks have never had it so bad after the DIRT revelations.
They brought it on themselves. Let that be said, even if it has been debased as a sincere sentiment, since it is now required to be said to affirm one's civicmindedness.
"They deserve what they get." Indeed they do, as everyone subject to the due and fair process of law deserves the outcome, must face the fine, penalty, jail sentence, whatever is provided for by law.
Except that is not what has been proposed. The proposal by the Public Accounts Committee is that, as "an act of generosity and restitution", the banks should be levied by law to make a contribution to the Foundation for Investing in Communities.
The idea that an act of generosity and restitution can be forced by law is a ridiculous contradiction, one which the intelligent members of the PAC - that is, all of them - are no doubt fully aware of, but choose to ignore for the sake of a rhetorical flourish.
It is not good for public policy that what is effectively a fine should be dressed up as a matter of good corporate citizenship, and one imposed by force of law. Retrospective punishments are not constitutional, hence the euphemistic "levy". The law on tax evasion already provides for interest, penalties and jail terms. Let the law take its course in relation to each and every institution - and person - against which there is a good case. Let there be a great court battle right up to the Supreme Court if that is how any of the banks chooses to address the expected Revenue demand for back tax, penalties and so on. Let the law be tested. If it fails to achieve the desired public policy, back to the legislators; it is not the fault of banks.
And why should all banks be subject to the same levy? If anything is now clear from the last two years of retail bank scandals, it is that not all banks acted in the same way. The PAC's report recognised this in substance - as it had to, and as the Comptroller & Auditor General did - but its recommendations in relation to a levy and dormant accounts failed to follow through on the point.
Another substantial problem with the PAC's proposal for a levy on banks is what is intended by "the banks".
There are 78 banks and foreign bank branches in the Republic now. Most of them are in the IFSC. Some 46 per cent of all bank assets in the Republic are held by banks with predominantly foreign business. Are IFSC banks to be hit with a levy aimed at making restitution for wrongdoing in the domestic banking sector which, for the most part, took place years before many of the international banks even arrived here?
Having spent great efforts attracting banks to the IFSC, promising a supportive, well-regulated environment for international business, the State would be foolish now to levy them to pay for domestic problems.
There is no easy way to put a ringfence around IFSC business. The Government is obliged not to treat the IFSC any differently in tax and other matters under the terms of the agreement with the EU Commission which paved the way for the 12.5 per cent corporation tax rate - a mainstay of economic policy for the next 10 years, at least. Anything which allows the Commission or other EU member-states to re-open that agreement would be bad for the Republic. A new levy, which was really a fine, imposed on domestic but not IFSC banks could do just that. For what gain? For questionable restitution on top of legal penalties, and for a Community Foundation for which the Government has plenty of money already.
There will be those who say this is crying wolf, just as the fear of capital flight scared the living daylights out of some public finance managers in the 1980s, rightly or wrongly. It is really about degrees of risk. Do we want to jeopardise past and future economic success for rather minor gains? I can't see why we should.
The proposed levy is simply bad public policy. And if ignoring the PAC's proposal saves "the banks" some pain, that is just so terribly unfortunate, isn't it?
Oliver O'Connor is editor of the monthly publication, Finance.
Email: ooconnor@indigo.ie
