Darling may extend bank tax to catch late bonuses

Despite threats of a mass exodus of bankers from the City of London to less taxing foreign climes, Chancellor Alistair Darling is apparently considering extending the tax on bonuses announced in the pre-Budget report last week.

The move could be forced on the Treasury in order to capture the bonuses of banking firms paid at unusual times of the year - and avoid charges of favouritism, according to the Times.

Last week, Darling announced a 50 per cent tax on all bankers' bonuses over £25,000 paid between now and April 5 2010, to be paid by the bank not the employee. However, certain firms, such as Rothschild, have an unusual tax year, which means they pay their bonuses in June.

If Rothschild in particular were to escape the swingeing bonus tax, it could lead to accusations of favouritism against the government, which has frequently sought the investment bank's advice in the past. More embarrassingly, John Kingman - the head of UK Financial Investments, which manages the Treasury's shares in Royal Bank of Scotland - is soon to take up a position at Rothschild.

Any suggestion that the supposedly 'one-off' bonus tax will be extended into another tax year, 2010-11, would be seized upon by Labour's opponents as further evidence that they are forcing bankers to leave the City of London - currently the world's second financial centre after New York.

However, banks will be wary of the price to be paid for appearing to resist too strongly what is seen by the public as a just punishment for the excesses that led to the financial crisis.

Staff at Tullett Prebon, an inter-dealer money broker based in the City, are reportedly requesting in their droves to be moved to its other offices in lower-taxed countries such as Switzerland, Bahrain and Hong Kong - not because of the bonus tax but because of the new 50 per cent higher rate of income tax being introduced in April 2010.

Tullett's chief executive has bowed to these demands - on condition that everyone on the same trading desk agrees to move to the same location.

The thought of these hard-bargaining titans of the City attempting to negotiate with their own colleagues which country they should all emigrate to might bring a smile to the face of a jaded public. ·