This is fascinating from the Milipede

Speaking ahead of the opening of the party\’s annual conference in Manchester, the Labour leader also announced that he would tax bankers\’ bonuses in order to pay for measures to tackle youth unemployment.

For you know, I\’m quite sure that bankers\’ bonuses do currently pay tax.

13 thoughts on “This is fascinating from the Milipede”

  1. So if receipts from this extra tax on bankers’ bonuses is going to spent on Good Things, doesn’t it make sense to make sure said bonuses are as large as possible?

    Or is the idea that the tax is meant to squeeze bonuses (which are Bad Things, aren’t they?) into extinction, thereby raising nowt for Good Things?

    Perhaps Arnald can enlighten us.

  2. If a couple of billion were able to solve the problem,then it would be a good thing to do. But as £175 billion doesn’t seem to have helped, why should an extra couple of billion?

  3. I’m sure the tax planning industry will love him if he really is going to add extra taxes on top on income tax on bonuses.
    When the top rate of income tax is 45% (and Millipede want to take it back to 50%) the incentive to plan to avoid tax on these must be very high.

  4. Politics trumping basic maths, redux. Top bankers (who make up maybe 1% of the banking world) pay income tax at 50% on cash bonuses and dividends. Everyone else pays tax at their highest rate on bonuses. As your average bank clerk only gets about £17k even in central London that isn’t exactly a lot of money, is it?

  5. PaulB

    Ok, income tax on dividends is a bit lower. But my point is that not many people are paying this anyway. The majority of bonuses handed out in the banking world are small cash bonuses to ordinary bank staff, most of whom are paying basic rate tax.

  6. If Microband is talking about repeating the 1-off additional tax on banking bonus payments, i.e. only on payments above the base salary, then he’s got f-all chance of getting 2bn off it. After the last time Darling did this, most of the major banks near-doubled basic salaries for the higher earners and reduced discretionary compensation accordingly.
    Even if banks are paying as much comp now as then in the UK (and JP Morgan’s troubles this year will put a big, big dent in overall comp) then they’d pay well under 2bn.
    The side effect of this policy has of course been that firing a poorly-performing moderately senior London banker is a much bigger salary saving than the corresponding NYC banking, so more UK low-hopers have been receiving P45s.

  7. 7Frances Coppola // Oct 1, 2012 at 1:12 pm

    “The majority of bonuses handed out in the banking world are small cash bonuses to ordinary bank staff, most of whom are paying basic rate tax.”

    Any evidence for that assertion?

  8. One gets tired of repeating that the vast majority of bonuses in London are paid by foreign institutions (and that the recipients are again overwhelmingly non-UK nationals).

    It is one of the few things that we have learnt that from the analysis of the Darling government’s bonus tax. Over 50% of bonuses were paid by US bulge bracket firms, and another 25%-30% by major European and some Japanese investment banks. UK institutions pay no more than 15-20% of bonuses.

    Dimon in particular, but also Blankfein and Ackermann, delivered Darling (and any future UK administration) the clear message that it was an experiment he should rather not repeat, for the country’s own good.

  9. #7

    I believe you are completely wrong here. Please see my previous post. In cumulative Dollar amounts, the big investment banks pay the vast majority of variable compensation.

  10. I wouldn’t be surprised if the majority of bonuses are small amounts to ordinary banking staff, but the majority of bonus money is large amounts to investment bankers.

    Darling judged well that he could get away with a one-off payroll tax on bonuses. There’s no information content in bankers saying it can’t be done again, but certainly banks will consider expected staffing costs in deciding where to locate staff. And highly paid staff will consider expected tax rates in deciding where to work.

  11. @ Luke
    Lots of evidence – in the reports and accounts of most of the companies described as banks by the Darling rules on bonuses.
    @ PaulB
    I have no sympathy for mega-bonuses paid to bank employees who are gambling with the bank’s money and incur no share of their losses. However most bonuses are a way of sharing profits and risks with staff whom do not work for banks using the normal English definition of the word – look at Brewin Dolphin and Charles Stanley (the two leading private client stockbrokers) and you will see that, as you expected most bonuses are paid to staff earning modest basic salaries. However the big banks, for whom FSA capital requirements are trivial, have restructured their pay scales to avoid future one-off bonus taxes so they will only hurt the innocent.

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