Britain hits banker bonuses with 50% surtax
The British government has decided to play hardball with the banking industry on bonuses: In a move that had been rumored in recent days, Finance Minister Alistair Darling today slapped a 50% surtax on payouts above a set level made from now through April 5.
From Bloomberg News:
The fee on bankers applies to discretionary payments of more than 25,000 pounds ($40,750) and will be paid by the bank, not the employee. Employees also will have to pay tax on the bonus at their marginal rate.
“There are some banks who still believe their priority is to pay substantial bonuses,” Darling said in Parliament. “I am giving them a choice. They can use their profits to build up their capital base. If they insist on paying substantial rewards, I am determined to claw money back for the taxpayer.”
The U.S. House in March overwhelmingly approved a bill that would have levied a 90% tax on bonuses paid to employees of companies that had received significant government aid -- mainly, the biggest banks that got Treasury capital under the TARP program. The tax would have applied to people who earned more than $250,000.
But the White House balked at supporting the bonus tax, and the proposal died in the Senate.
President Obama instead in June installed Kenneth Feinberg as a federal pay czar over seven companies that had received the largest dollar sums from the Treasury, including American International Group Inc. and Citigroup Inc. Feinberg has the power to limit compensation for top executives at the companies for as long as they hold on to Treasury capital.
Not surprisingly, Britain’s move has triggered a firestorm of protest from the financial sector and other business groups that fear the bonus tax will drive high-paying jobs out of London.
The British Bankers’ Assn. Chief Executive Angela Knight said foreign banks that reward staff with contractually agreed bonuses will be “hardest hit” and may look at London as “a significantly less attractive place.” Richard Lambert, director general of the Confederation of British Industry, said Darling’s “jobs tax” was a “serious mistake.”
-- Tom Petruno
Photo: British Finance Minister Alistair Darling. Credit: Carl de Souza / AFP/Getty Images