IRISH TAXPAYERS must accept the consequences of our lax regulation and stop complaining, a member of the board of the European Central Bank has said.
Writing today in the Financial Times, Lorenzo Bini Smaghi points out that “the principle of no taxation without representation works both ways”:
In the years before the crisis several countries, like Ireland and the UK, took decisions aimed at ensuring a more benign environment for their financial sectors. These included favourable taxation for banks, and less stringent self-regulation, rather than thorough inspections and reports. As a result, their banks grew larger and more profitable, increasing leverage and lending to risky sectors such as real estate. But taxpayers also benefited: bank profits filled up state coffers, as tax revenues rose sharply – financing higher public spending and reducing the pressure on taxpayers.
He says that while, in principle, the cost of a banking collapse should be borne by shareholders, managers and bondholders, “as long as [banking] supervision remains national and accountable to the taxpayers [..] those taxpayers should [..] assume responsibility for any failures.”
The article presents taxpayers with a choice: pass responsibility for financial supervision to Europe – or bear the cost of future banking failures yourself.
Does he have a point? Let us know what you think.
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