ESB share deal cost taxpayers €10m

A MASSIVE €10million was lost in taxes as Michael Noonan agreed to a loophole that allowed ESB workers to avoid paying universal social charge on company shares.

ESB’s Employee Share Ownership Plan, which has 10,800 members, lobbied the Finance Minister and then communications minister Pat Rabbitte in the lead-up to the 2012 budget.

The deal cost €10million in lost taxes in a full year as it applied to workers in some private companies as well.

Former finance minister Brian Lenihan had introduced a measure which meant share-based pay schemes would be subject to 7 per cent under the USC and 4 per cent under PRSI when workers were cashing in their shares.

The workers contacted the government ministers and in 2011 Mr Noonan agreed to an amendment, which was written into the 2012 Finance Act, to exempt such share schemes from USC and PRSI.

The ESOP then thanked the ministers and their government officials at the AGM in September 2011. The deal meant that when those in the ESOP and workers in similar schemes retired, they did not have to pay USC or PRSI, but still had to pay capital gains tax.

Letters obtained by the Sunday Business Post show the ESB’s ESOP manager Fiona MacGregor wrote to Mr Rabbitte after a meeting with him, telling him employees would be ‘most grateful for any assistance you would be able to give on this matter’.

The Department of Finance said the exemption of share-based pay schemes that were in place before 2011 from USC and PRSI cost the Exchequer €10million.