UK super-taxes bank bonuses

Francesca R

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Francesca R
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This is a vote-winner in the UK:

Banks hit by 50% tax on bonus payouts

Darling unveils super-tax plans for bankers' bonuses

No response yet on whether the Tories would keep it, though they are very likely to. Darling believes it may raise GBP 0.5 billion.

I think it is smart ("rebuild your capital base and you don't pay it; pay out and you do") and that banks will suck it up with no more than the usual amount of whining. I'm also glad I don't work for a bank any more.

(ETA--since it is applied on top of income tax, the effective taxation from these payments will be 70%)
 
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Francesca R said:
This is a vote-winner in the UK:

Banks hit by 50% tax on bonus payouts

Darling unveils super-tax plans for bankers' bonuses

No response yet on whether the Tories would keep it, though they are very likely to. Darling believes it may raise GBP 0.5 billion.

I think it is smart ("rebuild your capital base and you don't pay it; pay out and you do") and that banks will suck it up with no more than the usual amount of whining. I'm also glad I don't work for a bank any more.

(ETA--since it is applied on top of income tax, the effective taxation from these payments will be 70%)
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ETA is not strictly true. It is not a tax on individuals (income tax). It is a tax on the employer (more akin to corporation tax).

I think many people will get no bonuses up to April 2010 then get an exceptional one off payment for their work in May 2010.
 
I read it as April 2011 at first. It is indeed 2010 so "what the Tories would do" is rather moot.

However I can't believe it is as easy to avoid as simply delaying payment until 6/4/10.
 
Heard someone on the radio (MP but missed name and party affiliation) saying that this was a waste of time as it would "only" raise £500 million...
 
Francesca R said:
I read it as April 2011 at first. It is indeed 2010 so "what the Tories would do" is rather moot.

However I can't believe it is as easy to avoid as simply delaying payment until 6/4/10.
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It is not due to be paid until 31 August 2010. Retrospective changes to the legislation are not unheard of. The Tories could easily stop it or......... say look at what those nasty Labourites taxmeisters did, We wouldn't have done it but now the treaty has been agreed there is no point in us having a referendum on the subject.
 
What annoys me is RBS' claim that their investment banking group is making oodles of profits. But that only applies because their massive loss making divisions are not considered 'core' business. I think the total operating loss is still about £4.6 billion, according to Robert Peston's blog. So how they can even consider rewarding people is beyond me.
 
Well it would depend on the bonus metrics. For example my 1st wife and I both worked for IBM in the UK in the early 90s. Her bonus was a pittance compared to mine as hers was based on the profit of IBM UK Holdings Ltd whereas mine was based on sales revenue for IBM's network software division. IBM UK was losing money but the corporate network software division was very profitable.
In the bank I work for the profit pot is tied to results for the group and then that pot is apportioned to different areas depending on their KPIs and so on. I guess their pot is tied to each divisions balance sheet.
 
Did these banks take money from the government recently? Otherwise the government should stay out of it.


“We hope it will be a disincentive for banks to pay bonuses,” said one Treasury official.
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Welcome to a free country.
 
I thought there were limits as to how much you can tax something...
 
INRM said:
I thought there were limits as to how much you can tax something...
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Nope. Taxes of over 100% are unusal but they do turn up from time time.
 
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