Thursday 10 September 2009

Windfall tax of 80% aims to prevent speculation on rezoning

THE GREEN Party is claiming credit for significant changes to the National Asset Management Agency (Nama) Bill, including a risk-sharing mechanism between Nama and the banks and an 80 per cent windfall tax on developers designed to prevent land speculation in the future.

The Cabinet agreed the Nama Bill yesterday and it is expected to be published today.

The scale of the risk-sharing between Nama and the banks will be revealed by Minister for Finance Brian Lenihan in a week’s time when the Dáil debate on the Bill begins.

Green Party Minister for Energy and Communications Eamon Ryan said the measures his party had pressed for inclusion in the Nama Bill would ensure the taxpayer was protected and there would be no return to the speculative bubble that had created the problem in the first place. “My personal perspective is that a significant fall in property prices was a good thing and we are not looking for a return to property prices going back up,” he said.

“I believe that Nama is the least risky and most cost-effective approach for the Irish taxpayer,” said Mr Ryan. He added that Fine Gael’s “good bank” proposal would be more expensive and less effective while the Labour nationalisation proposal appeared to come from a desire for retribution but would not get around the need for Nama.

The Minister said that the risk-sharing mechanism between Nama and the banks would involve the Government issuing subordinated bonds as well as those backed by the European Central Bank. The exact proportions will not be disclosed until next week.

A condition of participating in Nama will be a guarantee by the banks that a fixed percentage of the loans issued will be lent on to small and medium enterprises.

The Minister also announced that a windfall tax of 80 per cent on profits gained from increases in land value due to rezoning decisions would be introduced as a committee stage amendment to the Bill to ensure that land speculation was not rewarded in the future. This is designed as a way of effectively implementing the Kenny report of the 1970s which recommended that development land should be worth no more than 25 per cent more than agricultural land.

Directors of institutions participating in Nama appointed before 2008 will now be required to step down over the next two years. The Greens said Mr Lenihan had also agreed to write to the leaders of the Opposition parties seeking their recommendations for nominations to the Nama board.

Another new element in the Bill is that it will be a criminal offence to seek to lobby Nama. All employees will report attempts to influence the operation of Nama to the Garda Síochána. The criteria in assessing the long-term value of loans will include the Minister for the Environment’s analysis of the extent of zoning and planning permissions granted, the Minister for Transport’s analysis of future land use based on transport planning, and the Minister for Energy’s analysis of trends in energy prices. The amount Nama can borrow without the approval of the Minister for Finance has been reduced from a €10 billion limit in the draft Bill to €5 billion.

“Nobody would choose to be in a position in government where the State must act to clean up and repair the banks. However, this is the position we have found ourselves in. Having examined the options available over the past six months, I believe that Nama is the best option to mend a broken banking system,” said Mr Ryan.

Fine Gael finance spokesman Richard Bruton called on the Government to publish the names of the 1,500 people who will be the beneficiaries of the Nama plan. “At its core, Nama is a secretive, tax-funded, politically directed work-out process for 1,500 of the most powerful, well connected, business people in Ireland,” said Mr Bruton.

Irish Times

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