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What they’re saying about taxing bankers’ bonuses
There is speculation that Chancellor Alistair Darling is considering a one-off super-tax on bankers’ bonuses this year
Chancellor Alistair Darling is believed to be considering a one-off tax on any bonuses handed out to staff at British-based banks. He has already ruled out a windfall tax of the kind levied on utility companies in the wake of Labour's 1997 election win on the grounds that it would hit their finances at a time when they are supposed to be consolidating their capital holdings against future financial shocks. Darling will announce his decision in the Pre-Budget report on Wednesday and commentators are divided on whether he will go ahead with what is a populist policy that will likely reap only minimal dividends for the taxpayer.
WHAT THEY ARE SAYING:Alistair Darling, Chancellor of the Exchequer: "We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what's going on. As we come through a difficult period we expect those with broad shoulders to bear the greatest burden."
Patrick Hosking, the Times: "Accountants can think of no personal tax which targets an occupation. Priests and barristers may be able to claim specific trifling expenses, but an entire tax against one occupation is unheard of and sets a potentially dangerous precedent. If it's bankers this year, could it be estate agents next year? Or professional footballers, or MPs?"
Robert Peston, BBC: "Bonuses will largely be paid in shares this year - for reasons of balance-sheet prudence ordained by the Financial Services Authority. But if those bonuses are taxed at say 80 per cent, it would be rational for the owners of the banks to instruct banks' boards not to pay bonuses at all, because to do so would be to squander precious share capital. In other words, such a super-tax might have the desired political effect of preventing bonuses from being paid."
George Osborne, shadow chancellor in the Daily Mail: "Gordon Brown seems determined to push ahead with his petty class war, even as his uneasy Ministers sound the retreat. It is a sign of how desperate he has become and a tragedy for a country that needs strong economic leadership."
Vince Cable, Lib Dem Treasury spokesman in the Herald: "The simple and correct approach, since many banks are returning to high levels of profitability, is for banks to pay for the taxpayer guarantee that they currently enjoy. A 10 per cent levy on bank profits would raise around £2bn in current conditions and would go to paying down the deficit."
Leader, Daily Telegraph: "Mr Darling is about to punish aspiration at the very moment we should be coming out of recession. If Mr Osborne can expose this imbecilic policy for what it is, then the Chancellor may soon discover that he has signed an electoral suicide note."
Angela Knight, chief executive of the British Bankers' Association: "We have already seen quite a few companies shift out of the UK. It might be popular to put very high taxes on a few, but we need to know how we would look internationally."
Lex, Financial Times: "The remarkable number of high earners who are non-doms would probably escape any punitive levy. There is nothing difficult about a global business paying a non-dom outside the UK. For the foreign banks, it would be entirely straightforward to make UK-based non-doms employees of a non-UK group entity to which it booked all relevant trades." ·
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I am surprised these merchant bankers are still in a job, particularly the ones who attempted to blackmail the taxpayer by threatening to resign. I would agree that too big to fail means too big to exist. I wonder if we can get these people to gamble with their own money. If they succeed then they are well paid but if they go bust then they go bust. However, it maybe that government induced cheap money means that profits are currently too easy to come by. I might then understand the merits of a windfall tax - until markets return to "normal" ??
This is largely electioneering. But ultimately the banking sector is wrong to think it can continue as it has done. Unfortuntaely it will take international agreement to sort out the mess and cut through any vested interests. But don't expect any real change within the next five years
'Tax them and they'd leave, cuddle them and they will stay'. So goes the rhetoric. If we've already decided that the banking industry is too big to fail (note the huge bailout), and regulation too much of a burden on those sensitive banking types to bother with (hence the criticism of a windfall tax), then where does that leave us? It seems to me that financial regulation simply means creating as lax a system as possible to lure financial services to this country, so we can attract staff who routinely employ tax avoidance measures at businesses that don't pay corporation tax, and how can that be of any benefit to Britain and taxpayers?
Bankers owe their jobs, their profits and their bonuses to the government which rescued these failing businesses. Bankers should try borrowing money at William Hill to gamble on the horses and see what sort of response they get -- it's likely to be a shoe-ing, either by the horses or, more likely, William Hill. Why should the government respond any differently?