Chancellor announces levy on bankers' bonuses

Thursday 10th December 2009

The chancellor yesterday announced a 50 per cent levy on all bankers' bonuses over £25,000.

The super-tax announced in his pre-Budget report is hoped to curb the culture of excessive bonuses.

The 50 per cent levy is to be paid by companies rather than employees and is hoped to claw back an extra £500 million for the UK. This money is to be used to pay for new measures also announced in the report including help for the young and older unemployed to get back into work.

Alistair Darling said: "If they [banks] insist on paying substantial rewards, I am determined to claw money back for the taxpayer. I have decided to introduce from today a special one-off levy of 50 per cent on any individual discretionary bonus above £25,000. This will be paid by the bank not the bank employee."

It has though attracted criticism from some who say it makes London a less attractive proposition for international businesses.

Angela Knight, British Bankers' Association chief executive, said: "Viewed from abroad, London may well look now like a significantly less attractive place to build a business. We must repeat that only concerted international agreements will succeed in reforming remuneration in the financial sector."

She added: "This new tax has to be set in the context of commitments already made. The UK's banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this."

Others have criticised the move arguing that a levy should have been put on bank's profits rather than staff bonuses, and that it would be difficult to enforce.

Vince Cable, the Liberal Democrat deputy leader, speaking in parliament after the pre-Budget report, said: "How will you stop the banks converting the bonuses into their basic salaries? You need not to try to tax bankers separately from high earners but to have to pay a levy on bank profits because they rely on the taxpayer guarantee."

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