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Bonus tax: Innocents punished?

Robert Peston | 13:47 UK time, Monday, 14 December 2009

Tullett Prebon has not requested or received a penny of taxpayers' money as part of the bail-out of banks over the past two years.

And yet it is liable to pay the chancellor's new super-tax on bonuses, or so it believes.

City workers walking past Tower Bridge in LondonIts chief executive, Terry Smith (a former colleague of mine in a past life) is in no doubt that the draft legislation relating to the super-tax catches Tullett, together with a whole host of other City firms which are neither banks nor obviously culpable for the excesses that led to last autumn's global banking crisis.

Tullett is a broker which matches buyers and sellers of financial products.

Banks are often its clients. But to hold Tullett responsible for the reckless risk-taking of its banking clients would be like holding Boots responsible for customers who ignore the instructions on the drugs it sells.

And nor is Tullett an unlucky exception. Stockbrokers, money managers and a host of other firms that don't look like, act like or quack like the supposedly malevolent banks are liable for the super-tax as per the draft legislation.

This looks like a mistake, since the Treasury originally told me that only authorised banks would be liable.

There must be a reasonable chance that the rules will be changed to exclude the likes of Tullett.

But damage may have been done. Some of Tullett's London-based staff have over recent months become increasingly persuaded that the UK provides a hostile climate for them.

Tullett has told them it will help them move to its overseas offices, if they want to relocate.

Such emigration won't undermine the British economy. But it looks like gratuitous harm.

Update 15:25: By the way, anyone from Tullett - or any such financial institution - who went into exile today would not save his or her firm any of the one-off super-tax. It's too late for that.

Quitting the country would simply be a protest and/or a prophylactic against future UK tax liabilities.

And as for clarifying whether Tullett and its ilk are ultimately going to pay the tax, in some ways that's more a matter for HMRC rather than the Treasury - in that the role of HMRC at this stage of proceedings is to interpret and implement the revealed preference of the chancellor (whatever that may be).

Comments

Page 1 of 3

  • Comment number 1.

    The governments policy on this is an absolute farce.
    Mind you the whole population has been punished for twelve years under this government, so what's new.

  • Comment number 2.

    This is the trouble with policy-making on the hoof. The law of unintended consequences comes into play.....it reminds me of the 10p tax fiasco....desperation perhaps?

  • Comment number 3.

    "Stockbrokers, money managers and a host of other firms that don't look like, act like or quack like the supposedly malevolent banks"

    Er, so you're saying that they aren't complicit ?

    Funny that, they're all pretty much from the same barrel to me.

  • Comment number 4.

    Yet again what we see from this dismal bunch of incompetents is the same old pattern
    - announce something to gather headlines
    - fail miserably to think about the details
    - ignore or smear anyone who points out the obvious flaws (preferably label them as racist or a paedophile)
    - Lie about the implementation
    - as things start to unravel (ie the press grow a pair and start reporting accurately) backtrack. Phrases like "obviously it doesn't apply to..." are useful.

    We've seen it before on numerous occasions.

    The only question I have is that this was being talked about as soon as it was announced, why didn't you question it then Robert?

  • Comment number 5.

    The suffering of financial services during this difficult times just brings tears to my eyes. To cull out this business and that business will lead to nothing changing. They were all aware of what was going on and all profiting from the scheme. Since no one is being held accountable, they must all be held accountable. It is like a club of thieves who refuse to turn the others in. All are guilty until someone is held responisble for the greatest theft in human history, well, maybe Clive stold more from India.

  • Comment number 6.

    Robert,

    In war there are no 'innocents'. I realise you are trying to split the arguments into 'those who have sinned' and 'those who haven't' - but do you seriously need to be taught that it was the system that was bailed out?

    Who are Tullets biggest customers?

    Would they still be operating with some of the biggest investment banks going bust in the UK?
    How many buyers and sellers of securities do you find in a depression?

    This is a joke - already the banks are wingeing and they are trying to seperate themselves into 'good banks' and 'bad banks' in a pathetic attempt to disguise the truth from the General public.

    The fact that Tullets are merely a slightly different parasite to the investment bank makes no difference. Do they produce anything? Do they build anything? or are they merely providing a service for banks who make so much excess profit they can't be bothered to find their own buyers and sellers of securities and would rather pay someone else to do it?

    "But damage may have been done. Some of Tullett's London-based staff have over recent months become increasingly persuaded that the UK provides a hostile climate for them.
    Tullett has told them it will help them move to its overseas offices, if they want to relocate. "

    Relocate where exactly? I'm dying to know where all these ex-finance staff are going as I will find some WMD's there and we can invade them at the first opportunity - circumventing any international law in the process.


    "Banks are often its clients. But to hold Tullett responsible for the reckless risk-taking of its banking clients would be like holding Boots responsible for customers who ignore the instructions on the drugs it sells."

    No it isn't - try this analogy

    "Tullet is more akin to putting the junkie in touch with the dealer and getting a finders fee as a result."

    This is even more accurate when you consider the relationship between lender and borrower is effectively junkie and drug dealer. The junkie just wants more credit to buy 'junk' and the banks keep having to find more junkies as the death rate (or rather default rate) is quite high.

    The BBC are pulling out all the stops today to produce dis-information about the crisis.

    You would have been better off asking why Tullets even exist in the first place when a free and fair market ensures you don't need a broker to but and sell securities and all trading can be done through the interent ensuring total buyer / seller coverage. Only in an unfairly and restricted market is there a need for this middle man of information collation.

  • Comment number 7.

    Given that the banks are all interconnected via the global banking system it follows that any measure designed to control irresponsible lending and its adverse side-effects must also be global in nature.This means that some banks currently not guilty of irresponsible lending or requiring a bailout will in advertantly be subject to the bonus tax.

    If each country had operated its banking system independently of banking systems in other countries we would no be in the mess we are in.We would have not had the Iceland crisis because savers would be banking in the UK and not Iceland.Similarly, toxic debt problems in America would not have affected our banking system.

    I have to say that I would feel a lot happier if the banks told us in detail what measures they had taken to prevent a further credit crunch as to all intents and purposes I cannot see much change in the behaviour of banks.When you have bankers selling complex financial products which they don't fully understand and when banks don't know how much toxic debt they own it is rather worrying as is the practice of giving loans without checking the ability of the applicant to re-pay it.

    It's rather sad that banks cannot operate more responsibly and if a bonus tax will take the banks and bankers back to prudent banking practices and see a return to modest and safe interest on savings then it is a move I would support.

    Maybe a reform of the banking system will divorce good banks from measures designed to deal with the irresponsible ones, but that's something for the banks and the government to decide.

  • Comment number 8.

    boo hoo.

  • Comment number 9.

    When I look at the bonus returns on my endowment policy, it is clear that I'm the innocent who is being punished...

    I'm afraid the whole of the financial sector is guilty of creaming of as much for themselves from the profits of their businesses, much more of which should really be going to the customers...

  • Comment number 10.

    If this government wasn't so dumb I'd say they are wrecking every concievable bridge and other forms of escape they can find just so they can leave the rest of us up the creek without a paddle when they've gone.

    Whether we like it or not the financial services industry is all we've got left for it will take years to bring back a balanced economy. In the meantime we need real businesses and someone who knows how to collect £40 billion of outstanding taxes to keep us going.

    The way in which Brown and Darling not forgetting Balls are treating this economy borders on reckless. How reckless would we be seen if we did not cut our personal spending and kept on borrowing until we could not borrow any more and were forced into bankruptcy.

    How apt that a comment I heard today said that if nothing else the Tory vote was a vote for safety. Safety at the moment perhaps but another six months of Brown & Co and it could be too late for anyone to rescue us.

    We need this election sooner rather than later.

  • Comment number 11.

    No sympathy. Actually I wanted to say "boo hoo" but warwick beat me to it.

  • Comment number 12.

    In a nutshell, I see no reason why they shouldn't pay it. They're all part of the same bubble. Just like everything else in the UK - a few have spoiled it for the vast majority.

    Cheers,
    Anthony

  • Comment number 13.

    I find this story an interesting take on the word 'Innocent'.

    All firms such as Tullets have made huge profits for the last 10 years - looking at their financial reports they made £125 Million pre-tax profit in 2006.

    Now considering "all they do" is put buyers in touch with sellers - didn't anyone think this was a lot of money?

    Many people and businesses are too happy to simply take the profits and not ask where it all comes from. It's like buying a stolen laptop in the pub - the first thing the police will ask is whether you considered it's exceptional value and he possibility it might be stolen.

    If Tullets (and others) had any sense they would have stashed the huge profits and would be able to subsidise the wages of the 'over-taxed' staff today.

    Unfortunately, like many other businesses, they convinced themselves that either:

    a) They were exceptionally good at what they do - even better than they thought!
    b) The expansion of the Economy was endless and going to keep getting faster and faster without ever slowing down.

    Now if a Business does not consider these two signs to be dangerous then they deserve everything they get I'm afraid.

    Instead they went into 'expansion mode' on the basis of a) or b) above and carried on with acquisitions (Chapdelaine for example) - a strategy that will get a lot of businesses into trouble as the unwinding occurs.

    I mean they even reported "Profit before tax – growth of 139% (2005: £52.3m)"

    ...and not once were concerned.

    Innocent - I don't think so, blinded by greed? - probably more accurate.

  • Comment number 14.

    9. At 2:36pm on 14 Dec 2009, TGR Worzel wrote:

    "When I look at the bonus returns on my endowment policy, it is clear that I'm the innocent who is being punished... "

    ....and me too - with the £48 made on my S&S ISA in 5 years on £4000 (actually created from my 'failed endownment')

    Where's my piece by Robert highlighting my plight?

    Will we all get a story about our plight tomorrow - or do I need to have worked with Robert first?

    I know I'm being harsh on the Pestonater but I think he's being a little bit too 'old boys club' today and presenting his personal gripe over the journalistic responsibilities he has to report the full and relevant stories.

    Why don't you take yourself on a tour of the country Robert - maybe visit 50 high streets in 50 towns and report back the plight of a sample of businesses - then you might realise our sympathy is wasted on stockbrokers going bust and should be directed at those who suffer most - the SME's.

  • Comment number 15.

    The coreect answer to the question is no.

  • Comment number 16.

    >Innocents punished?
    Yes, in the same way the collapse of the asset price bubble is destroying gainful employment and the value of savings for people.

  • Comment number 17.

    Robert,


    Us lesser mortals have bank tellers trying really hard to match us with bank loans. Glorified, reception staff directing traffic that have been out-sourced - expensively.

    What is the difference?

    It would be interesting to see just how many of the staff upsticks (given that the tax has only been announced and Some of Tullett's London-based staff have over recent months become increasingly persuaded that the UK provides a hostile climate for them, it seems likely they are and were already looking for reasons to run away from the mess they helped to create.

    Sorry, but they are part of the financial inudustry. If they were so innocent, why weren't they blowing the whistle with extra puff to put the brakes on?

  • Comment number 18.

    I often don't agree with WOTW, post 6, but on this ocassion he is correct.

    Companies like Tullett if not involved were certainly complicit in the creation of the current position which the UK taxpayer finds themselves. No doubt previous bonuses they received were buoyed by the false profits that the banks made and trading in the "bubble".

    I will come back to a point I raised in an earlier blog regarding the number of people who will pay the so called "super-tax".

    In order to be liable you will have to pay or be paid a bonus in excess of GBP 25,000. In order for someone to earn this sort of bonus you would expect them to be earning at least GBP 100,000 or GBP 150,000 a year basic.

    With the cutting of the tax allowance for people earning above GBP 100,000 from the 6th of April 2010 and the imposition of a 50% tax band for those earning above GBP 150,000 they surely would be paying 50% anyhow from next year onwards.

    This may come as a surprise to you Robert but there isn't much sympathy for bankers and their friends and their plights from those of us outside of the Square Mile.

    The following story is rather informative

    http://news.bbc.co.uk/1/hi/england/suffolk/8410453.stm

  • Comment number 19.

    Normally I have a lot of time for Robert Peston, but this article is so bitterly disappointing.

  • Comment number 20.

    Robert, you seem to have sympathy for these brokers and money managers caught up in the supertax. But the whole point is that the supertax captures many people in banks who have not had anything to do with the banking crises. By your own thesis, brokers working within banks should be exempt from this tax. What about the lawyers, the HR employees and the many thousands of other bank emplyees engaged in activities that have nothing to do with the so called "recklessness" of banks. They are all subject to the tax above £25,000. The whole supertax argument is a sham and "unfair".

  • Comment number 21.

    Mr. Peston. As the Sex Pistols stated: "Nobody is Innocent". Particularly in the financial services sector!

  • Comment number 22.

    Quote #9: ...then you might realise our sympathy is wasted on stockbrokers going bust...

    I don't think any stock-brockers are going bust right now. They are making too much money !

  • Comment number 23.

    Why do I keep getting it so wrong? What once was good is now dreadful

    On darkest night these people all rosetted knocked upon my door and promised me a vision
    A whole new world of justice understanding care and sun - an end to our derision
    All I had to do was brave the rain and put an x against their name
    They would deliver to us all a world for everyone well run
    All they needed was my decision.

    I voted so we could build a fairer society for us all to live in
    I put my money in the banks for it to grow and be security for my family
    I also wished for our planet to be a safer cleaner world for every nation’s children
    Just put your x they said we will do it all for you after all that is precisely what we want to do

    Everyone I gave my trust to has just taken me for granted and taken all for themselves
    Leaving us a depleted, mean, greedy illiterate world for all our now poorer children to inherit
    Well no one cares to act for us but just to numb our pain and brain
    With false and condescending words – why do they have no shame?

    Now at the end as all can see –
    who cares or dares to struggle trough my words
    They have also taken both the song and the poet out of me.
    I cant forgive hem that.

  • Comment number 24.

    Mr Peston wrote: Bonus tax: innocents punished?
    'Tullett Prebon has not requested or received a penny of taxpayers' money as part of the bail-out of banks over the past two years.
    And yet it is liable to pay the chancellor's new super-tax on bonuses, or so it believes'.


    I write:
    Average working Joe & Jane taxed: innocents punished?

    The average working Joe & Jane are about to have the amount they pay in tax increased to pay for the mistakes of the financial world.
    It is difficult to see why such is considered reasonable when they have not requested a penny in tax payer's money.

    Why are the working people of this country, who by their toil provide the very fabric of society which allows the financial world to both exist and flourish, so completely unrepresented in the media, or any where else for that matter?

  • Comment number 25.

    Robert, you're beginning to sound like a crony... it's even more impressive especailly after you've put a tanker load of fuel on the fire and now trying to come to the defence of an 'old mate'...

    Remind me not to get on your right side!!


  • Comment number 26.

    Now to everyone involved in the financial industry, it you want to feel valued, the BBC has a serious suggestion about what career paths will do that for you.

    Hospital cleaners are worth more to society than bankers, a study suggests.
    The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid.
    It claims bankers are a drain on the country because of the damage they caused to the global economy.


    It is right here...http://news.bbc.co.uk/1/hi/business/8410489.stm

  • Comment number 27.

    Good aricle below....

    "Hospital cleaners are worth more to society than bankers, a study suggests.

    The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid.

    It claims bankers are a drain on the country because of the damage they caused to the global economy.

    They reportedly destroy £7 of value for every £1 they earn. Meanwhile, senior advertising executives are said to "create stress"."

    http://news.bbc.co.uk/1/hi/business/8410489.stm



    PS:
    I agree its only really the UK clearing banks that have been supported and guaranteed (low interest rates have helped the FTSE though) however maybe if Tullett Prebon and co are pulled into this there will be more incentive for those who work in Finance to speak out and ensure that there is real reform in banking.

    To be honest I think Terry Smith of Tullet Prebon spoke about returning to the gold standard to restore faith in banking and the markets.

    But a wider Q is - how are these stockbrokers able to make so much money and pay such large bonuses as the market has performed so badly in the last couple of years? In my view its due to lack of competition and the fact that the cult of equity has ensured that pension funds are invested in stocks without any choice for the pensioners!

  • Comment number 28.

    Some of the comments here are shocking in their ignorance. Robert is right - just because a company like Tullett is related to banks doesn't make them accomplishes to bad banking and therefore they should be penalised. Tullett is a broker - very much like Ebay for Finance - where buyers and sellers get together. There is no client money invested nor any taxpayer equity or guarantees given. It is also wrong to say Tullett would be out of business if it wasn't for UK taxpayer : they wouldn't as not all banks had to bailed out.
    But it seems that the public has whipped itself into crazy banker burning frenzy and never mind the details.

  • Comment number 29.

    #6 and #8 sum up everything perfectly.

  • Comment number 30.

    In the end the only thing which matters in this whole story is the British economy and taxpayer. The stench of greed rips through this whole story and it is one which permeates business life and finance in this country. The thought of a fast buck no matter whose expense it is from runs right through hedge fund managers and bankers. Show me a banker with his main thought being the economy and i'll show you a liar.

    These people are charlatans. As for the arguement that they'll go elsewhere if theyre taxed too much (sic) ie fairly -well let them, theres hundreds more. Just like people at the bottom are dispensable so are bankers. The irony, lost in all this is that it is our money they are awarding themselves extortionate bonuses with!

    A better way of tackling this from HM Govt's POV would have been to say to RBS etc ok you can have your bonuses but we'll take the bail out money off it first.

  • Comment number 31.

    They are title sponsor for the 2010 London Boat Show, for heaven's sake. Hardly sounds like they are suffering from the recession. Maybe they can get round the super tax by giving all their staff yachts.

  • Comment number 32.

    Would you be blogging on this subject if your mate wasn't losing out?

  • Comment number 33.

    #6, how far down the chain do you want to point fingers at people who might not still be operating were it not for banks being bailed out?

    What about Savile Row tailors? How might they have struggled if they lost the business from bankers?

    What about places like Hotel Chocolat on Moorgate EC2? How much luxury chocolate would get sold in the City without well-paid bankers buying it?

    What about places like Burger King and McDonalds in the City? Should the people who work there be thankful they still have a job and give credit to the bank bail-out for that? Should they not get a bonus for a job well done because they'd have been laid off had the banks gone under?


    Jealousy is an ugly thing, it really is.

  • Comment number 34.

    To me the saddest thing about this story is that people will apparently leave the country because for one year only their bonus is limited to £25k!

    A bonus of 25k! Half the people working fulltime in the UK have a salary of £24k or less (24k is the median wage)


    Ambulance drivers, nurses, teachers get paid less than this 'derisory' bonus that financial sector workers are 'fleeing' the country for!

    Men and women are risking their lives in Afghanistan for less than this 'derisory' bonus.


    Greed is not good - its destoying society and destroying this country!


    Do these really prefer to leave elderly parents and up root their family just and leave friends so they can pay a lower tax rate?!

    sadly it seems the answer is yes :(

    PS - or alternatively they are just kicking up a fuss to force tax down -why would anyone still be in the UK with its 40% income tax when they could be enjoying the delights of the UAE with its 0% rate!!!!

  • Comment number 35.


    I don’t know about others out there;
    But when I ask myself, who are the real innocent’s in all this?

    I think about the guy who’s out there in the freezing cold currently trying to fix someone’s roof. Or the nurse at the local hospital taking abuse from some bedraggled drunk at 2.00 a.m. in the morning.

    Or the pensioner with insufficient funds to actually keep warm in winter.

    Or the working mum’s and dad’s who are struggling to keep a roof over the families head and food on the table.

    If Tullett Prebon’s main worry is their bonus, they should count themselves very lucky, because there are an awful lot out here worrying about far more than that.

  • Comment number 36.

    #18, you obviously know so very little about bonuses within banks you'd be better off keeping quiet about it.

    You don't need to be on £150k to get a £25k bonus. It's not unheard of for graduates with a couple of years experience to be hired on a salary of, say, £35k and then given a bonus of another £30k if they do an exceptional job. While £65k is a respectable income however you look at it, a person in that position is so far from the higher echelons with £150k basic (and perhaps £300k or more in bonuses) that the comparison is meaningless.

  • Comment number 37.

    Our money bailed out the WHOLE banking system - every business participating in the system and every business that trades with any business in the system.

    No-one in the business is an innocent bystander.

  • Comment number 38.

    Stockbrokers, money managers, middlemen and the like all lived very nicely off the goose that lays the golden egg. Its not a great shame that they are having a portion of their ill-gotten gains confiscated by the government.

    Now that said goose is showing signs of distress it is only fair that they are being included in the robbery perpetrated on us all. They should be thankful that they got away with so much before a slice of it was clawed back.

    We have all had to adapt to the change in conditions brought about by the bubbles’ bursting.

    After years of steadily rising debt I have desperately tried to reschedule, with a view to keeping a roof over my family’s head. Unlike Dubai World, I was unable to get away with calling a halt to my repayments.

    In fact, when I tried to pay-off my RBS credit card with an RBS personal loan I was told that I was not eligible as I could not afford the repayments. The funniest thing was when the young personal loans manager told me that as “a responsible lender the RBS was unable to help.” He failed to grasp that he would in no way be increasing his company’s exposure to my precarious financial position, as the same responsible lender had lent me the money in the first place.

    I’m sure if Mr Peston’s mate has anything about him he shouldn’t have too much trouble delaying his bonus until April 6th 2010, thus avoiding the headline-capturing yet naïve new tax.

  • Comment number 39.

    The banks obviously dont work in isolation and brokers and deal makers are in the mire too - aren't these the people who shift billions of pounds worth of pension funds around? Can't say I see any excuse for them to be tax exempt ....excceept to say I think the level at which tax kicks in should be £100k not £25k.

  • Comment number 40.

    All this user's posts have been removed.Why?

  • Comment number 41.

    14. At 2:55pm on 14 Dec 2009, writingsonthewall wrote:
    Why don't you take yourself on a tour of the country Robert - maybe visit 50 high streets in 50 towns and report back the plight of a sample of businesses - then you might realise our sympathy is wasted on stockbrokers going bust and should be directed at those who suffer most - the SME's.

    Would be interesting and also include the industrial estates where a mixture of businesses are based, local construction sites, and the leisure industry.

  • Comment number 42.

    Yesterday I went to a lunch party of old friends..of mixed Political Views and mixed Financial Understanding.

    The mood was sombre and un-festive. Even the Left there thought that the game was up and that this Goverment no longer had a moral mandate to stay in Office.

    All is for LIFE Mr Peston...but Death is our Destiny.

  • Comment number 43.

    When anybody mentions bonuses and credit crunch everyone jumps on the band wagon again. Why should we feel sorry for them?

    Thats not what these latest articles are about. The point is the rich banking people have a choice. They can pay tax here or a abroad.

    Considering the top 10% of earners in this country pay 53% of the tax bill do you think its a good idea to turn on them?

    Or shall we all learn the lesson and get back to where we were? Did it bother you when you could get credit for junk, a flash car and an overpriced house? Did you think the banks should have been more careful when packaging and managing debt products? No! so what makes you an expert now?

    Let the banks run themselves again and we'll be back on top in not time. They have no desire to do that again, they want to get out of public hands and back into the private sector. Get them to stay here and you can coin the tax in and the Government get a nice little wind fall when the loans and shares are sold back.

    Or conversely hound the wealth out of the country destroy the public banks and watch the money go down the pan.

  • Comment number 44.

    Peston's one-trick pony. A very odd business editor that can only comment on banking business...

  • Comment number 45.

    I have somewhat belatedly come to the conclusion that a significant number of posters on these blogs are political stooges.
    (my fault I know)

    Might I suggest you all post in your real names.

    Put up or shut up...



  • Comment number 46.

    It became obvious a long time ago that tax legislation needed to take account of people working in one country but domiciled in another. There is far too much money going abroad with many in the financial services sector claiming to live in Jersey or France and yet working 100% in London.

    International consensus along the lines of the “reciprocal taxation agreement” that HMRC have with other countries is unlikely to happen in the way that we need, since other countries would like to become the world’s financial centre they are more likely to offer a safe haven than to become part of solving the problem.

    However, what seems clear is that the reciprocal taxation agreement is fundamentally flawed. It is not working to tax people under the rules of the country where the work is performed only when they have been resident in that country for a full British financial year, what needs to be done is that tax is due on income in the country in which it was earned.

    And that’s difficult to define. Firstly you would find the average banker working from home sitting in Jersey. So you could define it to be the place of business of the company he provides services to... and the company moves to Jersey. Although that begs the question… if they are able to do that then why wait until now?

    But if they can really do that then further legislation becomes difficult – if the company and the workers are based in a tax haven then it becomes difficult to make a case for taxing them under UK mainland tax laws.

    I suspect the government need to get hold of their own tax havens and bring them firmly into the mainstream tax system and encourage that to happen as a global move, but there will probably be a tax haven somewhere for the foreseeable so the age-old question is how to get a sensible amount of tax out of these people without shooting the goose that lays the golden eggs.

    Well… is it really that hard in many cases? If you’re in UK retail banking then you must be providing a service in the UK and charging UK-based customers for that service. Therefore you can legislate that profits from that operation must be accounted for separately and taxed under the mainland UK tax system.
    And in the usual UK timeframe – none of this hiving the profits off overseas and delaying the liability (or nullifying it altogether). That’s the advantage of splitting a bank up - if we have clearly ringfenced the profits from a particular business function then it becomes easier to do prevent that happening. Even if you don’t, it seems sensible to consider those parts of a global business that are contained within the uk as being an entity that must operate as though it is the only part of the business – if you are due to pay tax on profits then you have to pay it, no excuses, no moving it off somewhere else to make a loss. Surely this cannot be as hard as they’re making it seem?

  • Comment number 47.

    I am a trader and guess what, I'm not evil, I don't plot dastardly things for the working class and I don't mug old ladies. Just because you don't use the services I provide, doesn't make them worthless or me a parasite. I suspect I don't use anything you lot produce.

    Today my company started discussions about relocation and I have to say, I'm all ears. Is it because of the "super" tax? Not entirely (which by the way is actaully a 75% tax - the company has to give half to the govt, then I give half of the half that's left).

    The UK is one of the most highly taxed environments in the world and I have been paying my "fair" share for years now, funding the myriad of benefits and handouts and just shear waste imposed by this government.

    But not anymore. You can all fund yourselves from now on.

    Being constantly attacked and victimized for something that has absolutely nothing to do with me. And please, you don't understand finance if you trot out the old "it's all interconnected so they're all to blame" chestnut as it simply isn't true. To be then told that the burden of paying for it is mine as well? Straw - camel - back. I'm sure you get the picture. Most people in this country are net receivers from the government. Who do you think pays for your childcare? Your retirement? Your NHS? You are not paying for the bailout and now neither am I.

    Flame away because I simply don't care anymore. By the way, for relocation, I'm thinking Monaco.

  • Comment number 48.

    Quote: #33 Jealousy is an ugly thing, it really is.

    It's not jealousy.
    The Government decided to take huge, massive, enormous sums of money from us tax payers to save the financial industry.

    Now the Government has to tax us till it hurts - and then some more still - to pay back that money. Short of striking more oil, there is no other way forward. The question is who pays what tax.

    Is it not fair that the stockbrokers, who were also saved as a consequence of the Government bailout, and whose profit and bonus this year are a consequence of that bailout, should pay this tax ?

    Nothing to do with jealousy.
    Wait till the real taxes and pain (and hunger for the poorest) start for the rest of us after the election !!

  • Comment number 49.

    Post 28 I fear you are the one that is displaying ignorance here. Do you actually know what Tullett do?
    I certainly wouldn't use Ebay as an analogy the following from the front page of their website is informative.

    "Tullett Prebon operates as an intermediary in wholesale financial markets facilitating the trading activities of its clients, in particular commercial and investment banks. The business now covers the following major product groups: Volatility, Rates, Non Banking & Sterling Cash, Treasury, Energy, Environmental, Credit, and Equities. Tullett Prebon's electronic broking division offers electronic solutions to these products. In addition to its brokerage services, Tullett Prebon offers a variety of market information services through its IDB Market Data division, Tullett Prebon Information."

    The words "in particular commercial and investment banks" rather gives the game away.
    For those who want to know more a view of their website is pretty informative.

    http://www.tullettprebon.com/

    Just in case the mods delete the weblink above just type their name in a search engine.
    Methinks you doth protest too much!

  • Comment number 50.

    We keep going around in circles on this one. Just as man was happier when he lived in caves so the financial world was a better place before the advent of bonuses. Why can't people be happy to receive differientiated annual pay increments for doing a good job?

  • Comment number 51.

    #36 Aaaaardvark

    4 A levels
    Honours Degree Genetics
    PhD Molecular Biology
    10 years research experience in moecular oncology and molecular neurosciences
    Curently unemployed - again!
    Largest annual salary ever earned was £28 500. Bonuses are not part of the system other than possibly coming up with a significant discovery that will help the health of until millions.

    If you want to help my friend out with some money, I'll give you his number.

  • Comment number 52.

    Post 36 thanks for enlightening me about how bonuses work in banks, no doubt you know from experience!

    In the real world bonuses tend to be in the order of 2 to 5% of salary and a bonus is a bonus not a right. In most jobs a bonus of 10% would be deemed very good and 15% as pretty amazing.

    Perhaps if a bonus of 85% of basic salary (GBP 30K on top of GBP 35K) isn't unusual in banking then perhaps that tells us more about the reckless risk taking undertaken by bankers that got us into this mess in the first place than anything else.

    I imagine to a graduate with a couple of years experience in say nursing or teaching or someone like my cousin as a lieutenant in the army who has just come back from six months in Afghanistan a salary of GBP 35K and a bonus of GBP 30K on top seems pretty obscene.

    It does to me.

  • Comment number 53.

    I have a feeling #47 is lining himself up for some abuse..

    I wonder if it's a common experience in his life in general..

    It's the arrogance of the way our society promotes this 'rugged individualism' that creates these types of people.. they just don't get it..

    We're all in this together my friend.. if you're not then good riddance..

  • Comment number 54.

    Post 47, Switzerland is a much better alternative for both tax and to be very blunt house prices. Have you checked the price of property in Monaco? I would suggest you do.

    If you want warm weather and don't like skiing I would suggest Bermuda or the Cayman's as they are much more amenable and they speak English.

  • Comment number 55.

    My heart bleeds for those poor souls at Tullett Prebon, imagine, you're the child of one of these bankers/brokers and you were expecting Mommy & Daddy to buy you that new Porsche 911 with their Christmas bonus but now on Christmas morning you're going to wake up to a Porsche Boxter instead.

    Oh the shame, the injustice and the heartbreak of it all.


    Do us a favour Peston, please remember that this is a tax on bonuses over £25,000, a figure that a great many people in this country would love to earn as a salary, never mind a bonus (something that most people haven't seen in years).
    The banking system was bailed out and this means the whole system must pay the price and if the staff at Tullett Prebon don't like it then maybe they could do what everyone else has had to do and go look for another job.

  • Comment number 56.

    To claim organisations like Tullets, have no responsibility for the credit crunch understates their influence on the market, especially in derivative and credit based products. They peddle these to banks and take a commission on each deal. I found the underlying blog very superficial. Perhaps because Terry Smith and Robert Peston once worked together, Peston is being less than honest about the role brokerage firms played in selling derivatives to Banks and hedge funds.

  • Comment number 57.

    #52, how is paying a bonus rather than a basic salary risky? If the hire is good they get paid a higher bonus, if they are no good they don't get a bonus. Had it been a salary then would have had an entitlement to it every month until they got fired. So actually the truth is the exact opposite of what you claim.

    Personally I've never had a 100% bonus but I know people who have. The best bonus I ever got as a percentage was a little under 30%. It's tough not being at the top. Incidentally it's not just banks that pay bonuses, I got paid a 25% bonus when I worked for a small consultancy where there were just 10 of us, and bonuses were paid as top-ups because business was variable enough that higher salaries couldn't be assured.


    Oh, and 48, it is jealousy. Stockbrokers were arguably saved by the bailout but if you'd read my post you'd see that we could make the same claim for just about every business doing anything for the workers in the financial district. The newsagents in Canary Wharf would probably have disappeared in short order had the banks vanished, as would the gyms, the bars, the restaurants and so on. So should we be pointing jealous fingers at the guy who sweeps the floor in All Bar One and say he shouldn't get a bonus because he wouldn't have a job were it not for the bailout?

  • Comment number 58.

    The only occupations where bonuses are such a high proportion of basic as in investment banking are in dodgy sales / marketing positions. The really big sales bonuses are usually in a situation like cold calling pensioners to offer to buy large quantities of second hand gold for £50. The bonus is necessary to salve their consciences.

    I am bemused as to why banks with all their contacts and clout feel the need to employ these "salesmen" on vast commissions. If they were all sacked around the world, I am sure deals would still be struck and life would continue, just a bit more cheaply!

  • Comment number 59.

    #36, did you ever wonder why so many people wanted to work in the City?

    It's easy to argue that the City rewards the wrong behaviour but if anyone chooses not to take advantage of what's made available it's hardly appropriate to then blame people who did take someone up on a higher salary.

    You can sell your time for £28k or you can sell it for £60k, £100k or more. If you choose to take a lower price for your time that's your call and your call alone.

    Sorry you're out of work, so am I at the moment.

  • Comment number 60.

    Firms like Tullet Prebon are not 'innocent' - they have benefitted massively from the bailouts and simply wouldn't have any business now if the government hadn't stepped in. Therefore it's only right that they should contribute more and the tax should make them consider how they incentivise their staff.

    Perhaps the bloated era of lazy management, greed and arrogance is over?

  • Comment number 61.

    Ian_the_chopper @ 52 - try looking at it this way round instead; in the example given just under half of the employee's expected salary is contingent on performance, if their employer doesn't do well, they lose almost half their annual income.

    Would you like to be paid on that basis?

  • Comment number 62.

    It's inevitable that this tax will hit the innocent as well as the guilty, whether or not the definition of companies caught is faulty. Even within the banks, there will be some highly-paid people who made the decisions that led to all the losses and problems, and others who did their particular job that had nothing to do with those problems and probably made a good profit for the bank...yet all are tarred with the same brush.

    Reading other comments, I suspect that many of the writers would be very happy to see the tax extended to ALL employers, whether or not they are commercial companies or anything to do with financial services. Anyone willing to own up to agreeing with this?

    And finally I've yet to see anyone commenting that recruitment to a bank is an open process. If you have the ability and want to join in the fun, you can always do so. If you prefer to get paid less elsewhere despite having the ability, that's your choice. If you don't have the ability to be highly-paid anywhere, then just be grateful for the tax paid by the others...

    PS I never worked in a bank in my life

  • Comment number 63.

    47. trader:

    Ta ta. Thanks for all the memories. Do remember to send us a postcard won't you.

  • Comment number 64.

    Finally, if bonus taxes are wrong, then who should pay to clean up the current financial mess.

    I know why don't we stuff it to the average working Joe & Jane, lets nail those that are least able to afford it. And let's destroy the savings of pensioners whilst we are at it.

    It always ends up the same, those least able to be able to absorb the cost of the problem, get hit.

    Whether Mullet and Peston get or don't get a bonus is irrelevant in my mind.

    What makes my blood boil is that the average working Joe & Jane always has to take the hit, and having so taken it, nothing changes. The whole cycle simply repeats itself.

    My concern is still those about to lose their homes, families destitute, kids lives shattered.


    So here’s a thought for the day.
    The banks have taken Government money to survive.
    The Government is likely to increase tax to pay for this.
    The extra tax means is likely to mean that some can no longer keep up with their mortgage payments.
    The bank in receipt of the government money then repossess their home.

    I take a very dim view of this business of making families destitute and disregarding the consequential damage done to young children and infants.

  • Comment number 65.

    It would appear that if the investment company or financial trading company is within a banking group, its caught. Isnt the key phrase "within a banking group" to make sure there's no inter-company avoidance.

  • Comment number 66.

    Well done, Robert. Stirred up a hornets' nest! Bet you are smiling.

    But to deflect the brickbats from yourself I think you should have expressed this differently:

    - Your friends THINK they are being hard-done-by, because they weren't reckless like the banks were

    - The government is going to punish them anyway, as they cannot distinguish good from bad, and they are looking for shelter.

    As you can tell, many of your fellow citizens do not share your concern/sympathy/recognition. They want rich people to carry more of the load in these hard times - a share of the load in proportion to their earnings.

    In a benevolent society, the rich people (bankers, property developers, footballers, politicians,...) would quietly and voluntarily offer a bit more, to help us out. But they don't, so we want to take it. It seems fair, as most of the windfall earnings came from us anyway.

    However,...

    We may (nothing certain) be shooting ourselves in both feet. The various parts of the Finance industry have been part of the backbone of the UK economy. Mr Brown has been feeding off it for a decade. He has let other industries crumble away while he focused on the easy money in property speculation, estate agency, conveyancing and financing (commercial and residential), plus consumer spending fuelled by equity-release. We will be relatively OK if the finance industry people stick around despite the tax changes. But if they do a runner, we face our financial equivalent of the MMGW "hockey stick" curve (this time curving downwards). Do we want to take the risk?

    But then, maybe this hockey stick is what Mr Brown intends. Many posters here suspect a scorched-earth policy, and isn't Mr Brown painted as the second incarnation of Uncle Joe? If he times this right, Mr Osborne will get the lame in a year's time.

    (On a separate topic: I see somewhere on the Web today a news items on how the average mortgage payer is about 150 pounds per month better off because of the artificially low interest rates. I think that is how much worse off per month my elderly mother-in-law is because her savings rates have been destroyed. That disgusts me)

  • Comment number 67.

    47 Bye

  • Comment number 68.

    If this is true it's a dirty great screw up on the part of the Government. There's no reason, however hastily penned this windfall tax, why it couldn't have targeted banks only. If brokers et al get dragged into this we shall be punishing entirely the wrong group. If a film is poor you don't, if you're sensible, take it out on the guy in the box office.

    Though I don't, still, accept that the UK is more hostile in general than other countries – at least not its major competitors. That doesn't justify this tax creepage but it would cause me to question the judgement of anyone who seriously wanted to jump ship to another territory for this reason alone.

  • Comment number 69.

    Writingsonthewall you state:

    No it isn't - try this analogy

    "Tullet is more akin to putting the junkie in touch with the dealer and getting a finders fee as a result."

    This is even more accurate when you consider the relationship between lender and borrower is effectively junkie and drug dealer. The junkie just wants more credit to buy 'junk' and the banks keep having to find more junkies as the death rate (or rather default rate) is quite high.

    ===========================

    Really!!!!

    If that is the case then the borrower is also to blame. This would mean every corporate company and private borrower (including you and me). Seriously if you believe that analogy then you should include everyone involved i.e. the people that borrowed any money and not just the banks. Also why don't we extend this to financial advisors, FSA, Bank of England, Government, general public who place deposits in banks. The lists goes on and on.
    ============================

    Writngsonthewall you state:

    You would have been better off asking why Tullets even exist in the first place when a free and fair market ensures you don't need a broker to but and sell securities and all trading can be done through the interent ensuring total buyer / seller coverage. Only in an unfairly and restricted market is there a need for this middle man of information collation.

    ============================

    So what about house buying through estate agents and car buying through dealerships. Heck you could extend this to electronic goods sold through Dixons and Currys. They are all essentially brokers e.g. Middlemen

    Most products are never bought directly from a buyer to seller. There is and will always be a middle man in the market. To suggest otherwise is just silly.

    Also if everything is done via the Internet how can this be free and fair when there is always going to be a part of the population that do not have internet access.

  • Comment number 70.

    47. trader:

    "The UK is one of the most highly taxed environments in the world and I have been paying my "fair" share for years now, funding the myriad of benefits and handouts and just shear waste imposed by this government.

    But not anymore. You can all fund yourselves from now on".

    Well done. This needed saying. Policies based on envy are nasty, and counterproductive. But this is what the UK has sunk to, it seems.

    If the government and the public hate all bankers and financial sector workers, fine - please just say so. Then, when they've all moved overseas, leaving a huge hole in the economy and in what's left of the public finances, how much better off will the UK be?

    Bankers may get huge bonuses, sure - but they (and their employers) also pay huge taxes.

    I would be the first to agree that NO bonuses should be paid by banks which took government money, but that's EASILY prevented - government, as majority shareholder, simply vetoes bonuses.

    P.S. And there's huge hypocrisy here. Recently - with our troops in Afghanistan woefully short of resources - government paid out £47m in bonuses to CIVILIAN staff at the MoD (not service personnel, please note). So a bonus to a banker is bad but to a civil servant it's OK, is it? Wouldn't that money have been better spent on helicopters?

  • Comment number 71.

    I am no friend of the banks, and abhor the excessively high bonuses they are awarding themselves - smacks of rewarding a naughty child who has misbehaved.

    However, having said all that, I can't help thinking that Darling could be throwing the baby out with the bath-water here. Surely as our financial recovery relies totally upon the country's productivity and its ability in this regard is heavily reliant upon a financial sector, that is actively seeking to move off-shore - couldn't this adversely affect our recovery ability?

    Silly me, of course this will be a problem for the incoming government, not the present crew. The childish malevolence of NuLabour really shouldn’t surprise us, their whole tenure, this past twelve years, has been to lie, cheat and deceive – why should they change tack now simply because their toys have fallen out of the pram.

  • Comment number 72.

    Peston:

    "Such emigration won't undermine the British economy. But it looks like gratuitous harm."

    Well zaNulab do need their political "scalps",even if the voters are`nt likely to be impressed by such measly action and most of the financial terrorists are still walking around with big fat smirks on their faces.

  • Comment number 73.

    Recommend the two videos 'The New Capitalism' if bloggers hadn't spotted them at the top of the page.

    A Short insight on how we got here and where we go from here.

    For those who are still confused it does show that a deep recession was on the cards because of overborrowing. The financial crisis happened to occur shortly before the recession was expected and exacerbated the crisis.

    It is encouraging that both Cameron and Mandalson seem to accept the road ahead although getting there is going to be the great challenge. Surprised that Mandalson admitted thinking the bubble was manageable and never ending. Getting real at last now is he?

  • Comment number 74.

    Post 54 - thank you for your kind suggestions, but I think it is you who have not really thought the Switzerland option through. Yes, my daughter could spend countless happy hours riding her pony, but where would I moor my boat?

  • Comment number 75.

    The people who should be taxed are MP's that seem to think that any expense they claim is free of tax. It's about time HMRC started having a good look at them and apply the same rules to MP's as they do to everyone else; backdate it for 5 years and apply penalties for attempting to defraud HM Government.

    It would raise about the same as Darling expects to receive from Bankers.

  • Comment number 76.

    And another thing, how many times have you been warned by a financial services firm that ‘investments can go up as well as down’?

    Well perhaps we should warn financial services that ‘taxation can up as well as down’.

    What we the average person ends up with, is investments going down and taxation going up.

  • Comment number 77.

    #66, it's all very well saying the rich should shoulder more of the burden. But the rich already do shoulder the burden. One of those "nasty bankers" earning £75k with a bonus on top is already paying some £25-30k in taxes. In other words this "nasty banker" is paying more in tax than the median worker earns. How much more do you want the wealthy to pay?

    Generally it's only at the very top that the serious tax avoidance can take place because it's only at the very top that the sums in tax that can be avoided are worth the costs of setting up the schemes in the first place. And at that level there is precisely nothing the government can do to stop it, because much of the structure takes the form of offshore entities which the government cannot legislate against.

    It's a cheap shot to say that "the rich" should pay higher and higher percentages of their income. But when "the rich" (whoever they are this time the term is used) are paying 40-50% of a lot of money, that's a lot of tax they are paying. Especially when many of them had nothing to do with the crash.

    I'll wager the people who bleat about "the right to access credit" are by and large the same people who are now bleating about "reckless lending".

  • Comment number 78.

    #47 trader

    When an army loses a war the entire army surrenders, the good and the bad. Your profession and I assume you belong to a professional organization did not prevent what happened and therefore you pay the price. Most understand that this was a deal between government and large financial institutions but like the government making the taxpayer pay for their deal with the devil so you must pay as well. You should be expressing your anger at the politicans and the large banks and not those on this page who are expressing justified anger at their betrayal by both the politicians who blocked all attempts to regulate the financial services industry, and you may wish to look at the position your professional organization took on such matters,and the financial services industry that caused this financial collapse for the public but does not seem to impact their business in any negative manner. When people discuss bonuses, they fail to remember that many individuals lost retirement accounts and individual investments that no proposal has been made for them to recoup. 25K may not be much in your profession but for those planning to retire it may have been the amount between making it and not, and it disappeared.

  • Comment number 79.

    I wonder how many of those bashing the bankers have made lots of taxfree money over the last few years buying and selling houses. The same ones are now benefiting from the lowest mortgage rates ever at the expense of small savers who depended on their interest to supplement the meagre pensions.

    If we are really looking for fairness then its time that the proceeds of the sale of houses should also be brought into the mix.

    After all aren't we all in this together?

  • Comment number 80.

    57. At 4:40pm on 14 Dec 2009, Aaaaardvark wrote:

    "Oh, and 48, it is jealousy. Stockbrokers were arguably saved by the bailout but if you'd read my post you'd see that we could make the same claim for just about every business doing anything for the workers in the financial district. The newsagents in Canary Wharf would probably have disappeared in short order had the banks vanished, as would the gyms, the bars, the restaurants and so on. So should we be pointing jealous fingers at the guy who sweeps the floor in All Bar One and say he shouldn't get a bonus because he wouldn't have a job were it not for the bailout?"


    This whole jealousy / politics of envy argument is getting a bit tired. I can level the opposite argument at those wanting to maintain the status quo - the politics of greed. So, an unhelpful stalemate then.

    I agree with you on a couple of points though. Targeting the financial services sector in isolation isn't particularly helpful. The rich in all walks of life have benefited disproportionately from the boom years. They can all help out now the government has paid out on the implicit insurance that made this possible. If these newsagents or floor sweepers you mention are also in line for 25k+ bonuses then you're right, they should be included in the super tax.

    That said, I also agree with a previous point you made. Looking at bonuses alone is meaningless. There is a world of difference between you example of someone on 35k plus 25k bonus versus someone on 150k plus 300k bonus. In fact it targets the competent on 35k with a 25k bonus but ignores someone who's done badly on 500k but only managed a 20k bonus.

  • Comment number 81.

    I’ve posted this blog before, but when there’s talk of the innocent hurt by what is going on, I post again.

    I am a self employed working Joe, husband and father of three, and here is a memory from some years ago.

    One Christmas Eve in the early 1990’s my last job of the year was to check the condition of a recently repossessed terraced property.

    On entering I noted that the large items of furniture were still there, sofa, wardrobes, beds, freezer etc, but personal possessions and easily portable items had been removed.

    Last on the list was a check of the roof space area and water tanks.
    In the middle of the roof space was a pile of ‘things’ covered by a blanket.
    I lifted the blanket to reveal the kid’s Christmas presents.

    Whoever had been repossessed had presumably ignored, or not realised the gravity of the situation, and had to leave in a hurry. I knocked on other doors in the street in an attempt to find out where the previous owners had gone, …… no one knew.

    I have seen the consequence of irresponsible financial lending.

    I have seen anxious children’s eyes, unable to understand why their security is about to vanish and the meaning of the word destitution.

    I have seen the usual residue of family life scattered across a terraced house floor and pictures of sporting hero’s and school achievements, still pinned to a child’s bedroom wall.

    There will be many who will pay a very high price for the financial mismanagement, but the truly innocent are the younger generation.

  • Comment number 82.

    Bonus tax: Innocents punished?

    >>>>>>>>>>>>>>

    What's new?

  • Comment number 83.

    Not sure it helps rational debate to use words like innocent, punish, victim, accomplice. The facts are that the government has a big fiscal hole to fill and when looking how to share out the burden it takes the view that the sector which (a) did very well indeed out of the good times and (b) did more than anyone to bring on the bad times can take more of a hit than the rest of us (NB I am UK taxpayer despite moniker). Yes this plays to the gallery but you know, maybe the gallery has a point?

    Like any measure there will be border effects, questions who's in or out. Tullett may not be a bank and they may not have issued toxic paper but they're very, very much closer to the source of it than many of the rest of us. Few in the financial sector screamed 'unfair' when, say, speculating in the oil price hit some perfectly decent businesses very hard. Sometimes stuff happens, guys. Most of the stuff happening to you has been pretty nice recently. By all means make your case for exclusion but please keep some sense of proportion, stop screaming that you're the victims of tyranny. If you don't manage it get used to it, get over it.

    Trader # 47 - enjoy Monaco. It'll cost you a lot of money. You must be very rich indeed if the extra costs there don't outweigh the taxes you'd pay here. Not sure of your numbers, I think it's actually a 66% tax, not 75%, as both you and bank pay 50% of the amount that's paid to you (bonus of 100 entails cost to bank of 150) unless I'm badly mistaken. And you sure as hell consume a whole lot of public goods that taxes pay for every time you walk the streets.

    I agree with those questioning where all these people think they're relocating to. OK the odd hedge fund to Switz, but that's one country that doesn't need more banks just now. Wall street is doing public pennance, and France and Germany are hardly paradise for taxes or inequality of income.

  • Comment number 84.

    virtualsilverlady

    And you have to ask yourself why, we had self-certication mortgages. The banks decided they had saturated the market and in order to maximise short-term profits, they let risk assessment fall from a very high building down in Canary Wharf.

    How long did it take for Joe in the street to realise the bank manager and his advisers were no longer there to look after the bank while providing a service, but there to meet sales targets?

  • Comment number 85.

    This is exactly the kind of situation that arises when a government responds to a populist campaign.

    The credit crunch was not just the result of risk taking driven by bonuses. It was because banks and building societies believed that they could make loans without any risk to their liquidity. They thought they would always be able to borrow through the interbank system. It was the failure of that system which, of course, caused the crunch. Even without the bonus culture, banks would have behaved in the same way. They thought they had a license to print money.

    THere is a case for a super tax on very high earnings, but it should apply to all high earners, not just to bank employees bonuses.

  • Comment number 86.

    To all those who enjoy banker-bashing without perhaps really understanding how important 'banking' is to the UK, I would ask "what do you propose putting in place to raise the vast amounts of tax that you consume, and which for many years has been contributed by the 'banks' once some of the banks are not here?" I have no great liking for the way the remuneration system in some sectors is made, but I do understand how important their income is to providing the NHS and schools. Killing off these greedy people in revenge is a bit stupid – but then so is this government for misinforming you as to their part in this.

  • Comment number 87.

    47. At 4:06pm on 14 Dec 2009, trader wrote:

    'Flame away because I simply don't care anymore. By the way, for relocation, I'm thinking Monaco.'

    Monaco is a very nice place. For a weekend. That's how long it takes to realize it's little more than posh concrete. And cramped posh concrete at that. Lots of nice cars though... If you think the best place for a supercar is a traffic jam and you like the challenge of squeezing it into an underground parking space that would be tight for a Vespa and has cost you €200,000.


  • Comment number 88.

    77. At 5:27pm on 14 Dec 2009, Aaaaardvark wrote:
    I'll wager the people who bleat about "the right to access credit" are by and large the same people who are now bleating about "reckless lending".

    No. Many of us have been fighting off the banks - many off us remember the '80s, learn from others mistakes and avoid debt and have a sense of responsibility as demonstrated by not getting into debt in the first place.

    Many of us prefer to sleep and night and be free enough to tell a fruitcake boss where to go should that be necessary - if you got debt those two things aren't so easy.

  • Comment number 89.

    Darling could've just blocked the bonusses. But he didnt - he decided to do what he always does when him and Gordo want to modify behaviour - tax.

    The funny thing nobody is really against high taxes - we already pay high taxes in the UK. What is spooking City folk is the unpredictability of it all and Darling and co moving the goalposts once the game is already is full swing.

    London's days as the epicentre of the financial world are already numbered - the rise of the east means business will slowly be moving east from the Square Mile and Wall Street. Only all that is now happening is that it'll happen quicker as financiers seek more stable operating environments and tax regimes. That's the crux - when everyone asks "where will they go" the answer is they are already moving east... punitive taxes like this will only hasten the departure.

    Tax revenues from the Square Mile might be down today but they will rebound.
    Unfortunately if they're not here that could mean that unless there is a drastic, and I mean really drastic, cut in services the hole in the budget will never be plugged and this recession will go on and on and on for ordinary folk.

    Lose lose all round but the biggest problem is the vindictiveness of it all and the manner in which all tax rises are made retrospectively. It's no way to run an economy.

    Raking in £3 for every £1 of bonus paid is absurd in any capitalist society.

  • Comment number 90.

    Any tax on City bonuses was always going to be political. It had to happen because of the taxpayer bail-out of the entire financial sector was followed by an expectation from the financial sector that so-called performance bonuses which had underpinned the culture that had caused the failure in the first place were going to continue.

    There has been no expression of fault, no expression of regret, no understanding as to how the taxpayer felt about being conscripted to subsidise the well-paid: just an ullulation for bonuses.

    If the City doesn't get it now then it never will. Those of us at the more prosaic end of business and commerce in this country don't understand how it is that the City can be so privileged within the tax and benefits system, so close to government for so long that the economy is structured to suit the City and few else and yet so utterly incompetent that they blew up their entire industry. I do not understand how anyone could ever be so stupid.

    The City had status, it had privileges, it had standing, it had respect: but sadly now it has none of this. They are as bust as British Leyland, wholly dependant upon the taxpayers tit and still they don't get it.

    There are a lot of people in this sad little country of ours who still don't get it. The government owns up to a debt for this year only of GBP 178 billion but still expects to increase budgets. The public sector unions are starting to work themselves up into a froth over pay freezes and pension reform. Sorry guys, but where is the money to come from?

    Those of us left in the 13% of the economy which adds value through making, buying and selling know full well that what little we make only keeps the wolf from the door: there is no way it can fund six figure salaries, bonuses and pensions for the many. The reality is that our sector has been under horrendous pressure during the boom as wages were escalating beyond our ability to pay the proper reward, tax and regulations was adding to the daily burden and investment streams from the City were shrinking. Yet we managed to survive.

    Now all we hear from the rest is how hard up they are and how unfair it all is. Well, we kept our end up when the good times rolled for the others, we will continue to keep our end up as we are that sort of people, but we knew that what you had was unrealistic and due to come to a dramatic and horrible end. I am sorry that it happened, I am even sorrier that once again the common folk are going to have to pick up the pieces one again due to the stupidity of the great and good.

    However, the one thing that needs to be understood by the financial sector, the political class, the nomenklatura and the apparatchiks is that the people; the vulgar, common ugly people, the people you despised and derided are now in charge. We are paying the piper, so you dance to our tune. Don't talk to us of injustice and loss: we know all about that as we learned it from the tread of your expensive brogues.

  • Comment number 91.

    wotw, top drawer stuff

    wasn't we told that government intervention was necessary as without it every banking institution would colapse. These guys are making profits in begign conditions, as a result QE, the taxpayer will be clobbered with this for years to come. Until we know what the bail out is going to cost us in total, hugh bonuses will remain obscene.

    However, imo, different tax rules by employment type or category of payment is inevitably going to lead to question of unfairness. But not also getting away with paying little tax is not being innocent

    to be frank paying 50% tax on all income over £100k is probably the correct way, as we will have from April.

  • Comment number 92.

    I think if the cap fits wear it but on this occasion I think Robert is right, no thought of the implications of the legislation by the government.

    The same applies to others who want to nail bankers whatever, if they were drug dealers and the recipients of their product are drug users most on here want both punished, the same cannot be said of bankers who provided a product, users abused that financial product by taking out loans for lifestyle changes, homes they could not really afford, but want to get away scot free, with no blame, as does the biggest user of these products the current government who gave no thought to actually paying their borrowing, budget gone from £370 billion to £650 billion over 10 years, a sound surplus gone and know a defecit equal to 13 % of GDP, nobody made the government borrow the money, they were happy to take the tax from the financial sector.

  • Comment number 93.

    One point which hasn't been aired enough here is that it's not just the rich who are overtaxed - virtually EVERYONE is paying too much tax. This government has been totally reckless where spending is concerned and, far from learning, recently INCREASED expenditure in the PBR.

    Where "the better off" are concerned, I see that the government now wants them to pay "the biggest share" of filling the fiscal hole. Fine - but hang on a minute; aren't they already doing precisely that? How much more tax do you expect them to pay? 60%? 70%? 80%? Denis Healey tried that; it failed.

    And this is a con anyway. The wealthy cannot pay "the biggest share" - there aren't enough of them. The sums don't add up. To tell the voters that this mess can be paid for by the wealthy alone is simply dishonest.

    A point which seems to go unnoticed is that the UK is part of a global financial system. Such a system puts tax regimes into competition with each other to attract capital and talent - logically, both businesses and above-average earners will gravitate away from the countries with the highest tax regimes, to the benefit of lower-tax economies.

    Some might think that domicile is about much more than tax. True - it is. But precisely what other features of the UK are likely to offset our high tax rates, and attract people and businesses to move here (or stay here)? Is it our wonderful climate, I wonder? Our charismatic, much-loved Prime Minister? Our freedom from PC moralising? Our law and order, and freedom from corruption? This is rapidly becoming an over-governed, over-moralised, joyless society. High taxes just give people one more reason to up sticks.

    It's high time the government stopped relying on the politics of envy and divisiveness, and started cutting its expenditures to fit within our resources. Neither "the rich", nor the world in general, owe UK plc a living.

  • Comment number 94.

    Another little Gem has just crept out of the woodwork. IPT will now be charged on Insurance fees. It did NOT apply before.

    Sneaky or what. IPT is currently 5%

  • Comment number 95.

    Robert

    Are you falling into the same trap that caught the FSA! Are you spending so much time in the City that you have lost your independence and have started to believe their propaganda? The Windfall tax is a tax on exceptional profits generated by exceptional circumstances - i.e. the complete collapse of the financial system and subsequent rescue by public money. Of course brokers should pay the tax.

    If they threaten and blackmail the British people then we should call their bluff and let them leave. If they are so clever and special why do they need to gamble with other people’s money? They don’t create wealth; they just funnel it to the rich!

    Let them go, impose sanctions on Switzerland and other tax havens and use the revenue to support British entrepreneurs who invest their own money.

  • Comment number 96.


    'Some wicked men are rich, some good are poor;
    We will not change our virtue for their store:
    Virtue's a thing that none can take away,
    But money changes owners all the day'

    ----------------------------------------

    'Before them both I held my shield of might
    And let not either touch the other's right.'

    Solon 638BC - 558 BC Athenian statesman and poet.

  • Comment number 97.

    All this reveals is something that many of us who work in tax knew already. The PBR tends to be a total and utter muck up (I am being polite) more often than not. In effect what the govt states is we are changing the law with effect from todays date based on legislation which we have not drafted never mind passed, and even in summary almost certainly got wrong.

    Now call me old fashioned but as far as I am concerned my responsibility is to obey the law as it stands currently not try and second guess some govt announcement about what they intend to do in the future, if they can understand what they have proposed and can get the necessary parliamentary majority.

    So what is new - when did this govt ever care about what the law actually says

  • Comment number 98.

    What a weird day.

    1) I agree with WOW. Great posts with no Marxist drivel attached.

    2) Trader you need to be more aware of the environment you work in. You are part of a fiat currency kleptocracy that steals from those most vulnerable. You might think you deserve all that you earn but you must know the environment that you work means the abuse of third world countries, creates wars and destroys lives. Enjoy. In a sound money environment you would not be able to manipulate the world as you do.

    3) To all of you who want to put all of the blame on the borrowers I would point you to an elderly relative of mine, living totally on benefits, financially illiterate, up to his eyes in £0000s debt, as I found out today, none of which is below 25% APR. I will bail him out, but others are less fortunate, worrying endlessly about the debts, constant phone calls and harrassment. Borrowing more to pay the interest (sound familiar Gordo?) To all of you engaged in mindless usuary "doing god's work" you will get yours.

    4) BA staff it's time to wake up, you are losing hundreds of millions of pounds at the moment, your pension fund is in crisis and you are abusing your cusomers by destroying their Christmas holiday. You are just making your end more certain.

  • Comment number 99.

    Wake up

    These are the parasites that live on the parasites

  • Comment number 100.

    This tax (50%) is paid by the companies, not the recipients of the bonus.

    This being the case, the amount paid by the company would be taxed on the recipient as a payment in kind (another 50%).

    So the entire bonus would go to HMRC. No?

 

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