Goldman Sachs bonuses delayed 'to exploit tax cut'

Jan 14, 2013

But most banks will not delay, fearful of public backlash against tax avoidance

INVESTMENT banks, including Goldman Sachs, are considering delaying payment of their bankers' bonuses to take advantage of the five per cent cut in the tax rate to 45 per cent for top earners due to be introduced on 6 April.

The Financial Times says Goldman's plans relate to bonuses due for the three years to 2011 rather than 2012. Goldmans could pay out as much as £8.3 billion.

Credit Suisse, which is also paying deferred bonuses for the last three years, will pay out after the tax rate drops, too. However, the Swiss Bank says its bonus date was moved permanently to April two years ago.

The last time banks shifted their bonus dates en masse to optimise tax efficiency was in 2010, when the Treasury lost at least £16 billion as a result of the Labour government's decision to increase the tax rate to 50 per cent.

Roughly half the top 20 banks in London are believed to have considered moving bonus dates back to April instead of the traditional pay-out period between January and March. However, most are believed to have decided not to take advantage of the 6 April tax cut because they don't wish to provoke the sort of public anger endured by tax avoiders Starbucks and Vodafone.

"I don't think many if any banks will end up delaying their bonus payments," said Bill Cohen a partner at Deloitte. "It would be sensible housekeeping rather than aggressive tax planning. But there is a growing concern about reputational damage of large firms being seen to avoid tax."

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