Tax
Banker super tax must be temporary |
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| Tax | |
| Written by Roberta Murray | |
| Wednesday, 09 December 2009 | |
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Move to tax bankers bonuses welcomed, but it must not be a permanent move.
Alistair Darling's decision to impose a super tax on bonuses of City bankers will go a long way to appease public anger over the role of the UK banks in the credit crisis. Leading financial and business adviser Grant Thornton says: "Today's announcement is a bold move by New Labour to show the Government is listening to public dissatisfaction over the salaries and bonuses of wealthy City bankers with an election only months away," says Dana Ward, Financial Services Tax Partner at Grant Thornton. The Chancellor's decision to impose a temporary 50% levy on UK banks paying bonuses on amounts in excess of £25,000 if they choose to pay substantial bonuses instead of rebuilding their capital base, will mean banks will have to consider their options carefully. Certain banks have already taken precautionary measures and increased salary levels to compensate for the anticipated impact on bonuses. This leaves banks with an increased fixed cost and less room to manoeuvre in strengthening their regulatory capital base. "Banks may have to absorb the additional levy cost to reward their key executives or risk losing their top revenue earners. The Chancellor is clearly expecting banks to behave in a responsible manner whilst asking them to walk the same tightrope that the Chancellor does in balancing the requirement for growth whilst addressing their capital deficit." continues Ward. "Whilst it is preferable that the measures are aimed at an institutional level, they could be counter productive and seen as an attempt to regulate pay within financial institutions when what is really needed are longer term measures to achieve the cultural shift within organisations to ensure that their remuneration policies are not contrary to public interest." "Fiscal policy must be seen to be implemented equitably and responsibly. Arguably the current measures will be seen by some as a form of fiscal retribution given their targeted nature. This could lead to highly paid individuals seeking to take themselves out of the UK tax net. "The devil is indeed very much in the detail as the measures require banks to report details of all bonuses over £25,000 awarded between 9 December and 5 April 2010 irrespective of whether they believe bank payroll tax applies or not. The banks will clearly be subjected to much tougher scrutiny in relation to their bonus arrangements which will inevitably lead to difficult negotiations with HMRC," concludes Ward.
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