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Dublin: 9 °C Monday 21 April, 2014

Column: It’s the turn of banks to pay a financial transaction tax

This week, former trader Nick Leeson says it’s time Enda Kenny stop playing softball with the banks and siding with UK politicians – and focus on getting restitution for his citizens.

Nick Leeson

JUST OVER A week ago, Taoiseach Enda Kenny said he would not allow Europe to impose a financial transaction tax if Britain does not accept the move.

Very noble of him in support of his nearest neighbour – but a hollow statement as it stands. The UK remains in a far stronger negotiating position than Ireland and has already signalled its strong intent to resist any attempt to levy the transaction tax.

Whilst Mr Kenny has made it clear that Ireland would not accept a tax which would result in a difference between what happens in London and what happens in Dublin, the fact of the matter is that as the first recipient of the eurozone bailout, he would be railroaded into it. It is right to point out that the Financial Services Centre here is of as particular importance to the economy as the City of London is to the British economy.

But it is rather dramatic to suggest that the impact of any imbalance would be so severe. The City of London competes aggressively with the financial centres of Frankfurt and Paris; I’d doubt that the IFSC in Dublin gives it much cause for concern. The IFSC will continue to prosper based on the very advantageous corporate tax rates that exist in this country. As long as these exist, the financial transaction tax will have very limited negative effect.

In lay terms, the financial transaction tax represents an attempt at restitution. Banks have been bailed out repeatedly over the last three and a half years. They quite rightly pay interest on the monies that they have borrowed but other than becoming largely State-owned there has been no penalty levied for their gross incompetence and negligence. The financial transaction tax is one direct method of imposing that penalty, making restitution and over time rebuilding the nation’s coffers and hopefully seeing an end to austerity. We have all endured tax increases, spending cuts and a general reduction in the standard of living, anything that reduces our burden should be encouraged. Mr Kenny should be more mindful of that.

Rather than limply trying to side with the politicians in England, dreaming up household charges and increasing taxes on pensioners, the Taoiseach should focus on culpability and atonement. The citizens of this country were let down by the government, the regulators and the banks. The government of the time were voted out of power, the regulator has long since departed but the banks have remained largely unscathed. A financial transaction tax is a must. The general public have to stop paying. It’s the banks’ turn.

Rather than be scared of what may happen in the financial sector, let’s put some manners on it

Unfortunately, politicians still seem to be treating the banks with kid gloves. It is another clear case of the tail wagging the dog, exactly the same scenario that resulted in the mess that we have all been forced to bear the brunt of. That can only be worrying. Banks were allowed to govern themselves, pick and choose the rules that suited them and rather recklessly get it wrong. Rather than being scared of what may happen within the financial sector, it is time to put some manners on it.

On a related note, Sean Quinn has been lamenting the fact that he has been victimised by the banks. I have upset a few people in my time; in fact I received my first death threat just a few weeks ago. I didn’t take it too seriously as the person was speaking to me and had paid to attend a talk that I was giving – but the sentiment was there. In Sean Quinn’s case, he borrowed massively from the bank, repaid very little of his borrowings, speculated wildly with the bank’s shares and this in turn contributed to their downfall. They quite clearly have a reason to be aggrieved. He is being pursued with vigour and rightly so.

It does seem, however, to be a one-way street. Sean Quinn has been declared bankrupt, many developers have suffered the same fate but you have to question the imbalance. Who is pursuing the banks with the same level of vigour? To date there is no evidence that anyone is pursuing them! There was obvious and repeated wrongdoing but no-one is paying the penalty either fiscally or criminally. It is being slowly and surely swept under the carpet. I really do find it absolutely astounding and don’t think that it could happen anywhere else.

Focus will now shift after the EU summit to whether or not Ireland will hold a referendum. I sincerely hope not. I expect any government to surround themselves with well qualified advisors. We have an elected Government; we must trust it and its advisors to make the right decisions. These crucial decisions can only be taken by people who have the requisite knowledge and who are privy to all the necessary information. I don’t know about you but when I get on a plane, I am comfortable that there is a skilled pilot at the helm; I certainly wouldn’t want the passengers to toss a coin and let the cabin steward have a go.

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