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Irish Banking Inquiry

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The Irish Government's convoluted, evasive plans for a banking inquiry are a bucket of whitewash and waste of time. They insult the electorate who will bear the cost (€40+ billion) of the crisis without ever seeing and hearing exactly why and how it happened.

We need is a new type of inquiry which is a mix of tribunal and commission and provides for membership by politicians and others. It should have subpoena and discovery powers, take evidence under oath, make findings, exclude lawyers, be open to public and televised, have an independent chairperson, engage expert support staff, hold private hearings by exception, have power to refer to ODCE/DPP/Gardai and so on. There are plenty of examples of this type of inquiry including the US's Financial Crisis Inquiry Commission which is examining a much more complex crisis than Ireland's and required to report by the year end.

A quick referendum would also facilitate other major inquiries in the future. It would make sense to delay the banking inquiry until the necessary changes could be introduced.

The Government needn't spend three months scoping its flawed approach to a banking inquiry. Instead, it should look at the terms of reference for the Financial Crisis Inquiry Commission. Most of them are relevant including role of regulator; monetary policy and availability of credit; accounting practices; tax incentives; capital requirements; credit rating; lending practices; concept of "too-big-to-fail"; corporate governance; compensation structures and levels; legal and regulatory structures; quality of due diligence; and fraud and abuse. To these, I'd add role of media and commentators; role of ministers and government departments; and relationships between politicians, developers and bankers.

Needed to say, a proper inquiry would not stop at September 2008 and should investigate the basis for the bank guarantees (relating to liabilities exceeding €400 billion), Nama (cost to taxpayer unknown but could exceed €10 billion), nationalisation of Anglo Irish Bank (€4 billion injected and another €6+ billion to follow) and provision of €7 billion in preference shares to Bank of Ireland and AIB (at a time when their combined market capitalisation was a fraction of this) with billions more to follow.

It is quite clear that the Government is doing its very best to frustrate the electorate's demand for an inquiry by doing as little as possible and working as slowly as possible. At the very least, the Opposition should withdraw all support for the proposed inquiry and undertake to set up a public inquiry when they win the next election.  

Celtic Tiger pussycats

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When a quarter of Iceland's electorate opposed the payment of €3.8 billion to the UK and Dutch governments arising from its banking crisis, its President refused to sign the relevant bill into law and the matter goes to the people in a referendum.

Meantime, our Government rams Nama down the electorate's throat and bails out banks and developers at a cost of at least €20 billion notwithstanding widespread opposition.

Whereas the Icelandic government resigns, our government clings to power in spite of having presided over the entire crisis.

While Iceland hires a high-powered, international investigator to help investigate possible criminal actions by bankers, our government dithers about even holding an enquiry.

Clearly, the Celtic Tiger has turned the Irish electorate into pussycats.

Letter published in the Irish Times on 15th January 2010.

Distribution of Incomes

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Oft-quoted official statistics about income distributions and income tax are just plain wrong as they treat dual-income married couples as single tax payers, notwithstanding moves towards individualisation. This has the effect of completely ignoring about 400,000 earners and overstating the taxable incomes of their spouses by approximately one-third. Dual-income married couples are highly significant as their average income, based on published Revenue data, was €70,000 as compared with €27,000 for all other tax cases. They accounted for about 36% of all income and 41% of all income tax notwithstanding that they represented only 17% of tax cases.
 
If the incomes of dual-income married couples are divided in the ratio 65/35 then the overall distribution of incomes is radically altered. By my reckoning *, the number with gross incomes under €40,000 in 2008 would increase from 1.48 million tax cases to 2.25 million earners, a jump of 52%, and the number with gross incomes above €40,000 would decline from 0.89 million tax cases to 0.52 million earners. This redistribution has huge implications for plans to bring more low-paid earners into the tax net because they are earning substantially less than suggested by official figures, or for increasing the tax take from high earners who are less numerous than reported.

Letter published in the Sunday Business Post on 3rd January 2010. * See revenue_tax_cases.pdf.

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This page is an archive of entries from January 2010 listed from newest to oldest.

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