Banks need only cover losses if they are in profit

BANKS will only be forced to cover losses made by NAMA if they are profitable at the time, it has emerged.

Finance Minister Brian Lenihan has confirmed he will include a corporate tax “surcharge”, rather than a levy, in the legislation establishing NAMA.

Corporate tax is charged on the profits made by a company and the surcharge means the state would effectively take a greater slice of the banks’ profits if NAMA made losses.

But a levy could have been imposed on the banks whether they were profitable or not, and according to the opposition, would have offered far greater protection to the taxpayer.

Mr Lenihan revealed plans for the surcharge rather than the levy during the committee stage of the NAMA legislation, which concluded after a marathon final session at 5.35am yesterday.

The committee is the third of five stages involved in passing an act in the Dáil. The bill begins its fourth stage next Tuesday, when Mr Lenihan will bring forward the provision introducing the surcharge as well as other amendments.

He told TDs the surcharge was preferable to the levy, as the latter would risk devaluing the banks because it would expose them to covering possible NAMA losses regardless of their means.

Mr Lenihan reiterated, however, that he does not expect NAMA to make losses.

Unsurprisingly, bank shares rose in value on foot of the news.

Junior coalition partners, the Greens, who had claimed credit for the commitment to a levy, insisted that the surcharge was the same concept.

But Labour TD Joan Burton warned it could be 40 years before the banks turned profitable, meaning taxpayers would be saddled with any losses made by NAMA in the meantime.

Sinn Féin senator Pearse Doherty labelled the surcharge “a cop-out”.

He claimed it would allow banks to continue paying senior staff exorbitant salaries.

“This tax surcharge is a cop-out. Before banks declare a profit, they have to meet their operating costs. Their operating costs could include a multi-million salary for their CEOs, board members and senior management; trips abroad; company Mercedes, and so on.

“After all this has been catered for, only then will this Government ask the banks to pay something towards the huge risk the taxpayer is taking on through NAMA,” he said.