How to super-tax the real culprits
The chancellor said in his pre-Budget report speech that his motive for levying a one-off super-tax on banks that pay big bonuses was to deter them paying out precious resources to employees and encourage them instead to "rebuild their financial strength and increase their lending".
To be clear, if it was his only aim to strengthen banks in this way then probably the easiest route would have been to oblige banks to pay 100% of their bonuses in shares or equity capital, rather than cash (which, as it happens, is Tory policy).
So presumably at least part of Mr Darling's aim was to raise some wonga for the public purse and spank the banks for having to be bailed out by all of us.
Even so, it really is odd that the draft legislation for the new tax explicitly says that it is payable by all sorts of financial institutions which are not what most of us would think of as banks - such as stockbrokers and interdealer brokers (see my note of yesterday).
And I am unclear whether this oddity is deliberate or the undesirable consequence of drafting unprecedented new tax law in a great rush.
That said, changing just one word in the draft legislation would probably remove most of the apparent anomalies.
The point is that Clause 19 section 1c defines a "UK resident bank" liable to the tax as a company that either takes deposits "or" carries on dealing in investments as an agent or principal.
Which is why non-deposit takers such as Tullett and assorted other brokers are liable to the super-tax - although on the face of it they are not in the category of banks which the chancellor wants to discourage from paying bonuses (unlike many of the giant banks, they did not indulge in the reckless behaviour that mullered themselves and the economy).
But these putative innocents would be protected from the tax if the "or" was changed to an "and".
This one word change would mean that only deposit-takers which also operate as investment banks and financial dealers would pay the punitive tax.
The likes of Barclays and RBS would pay the special levy, but Tullett and many other smaller monoline financial brokers and agents - which have neither been offered nor have taken succour from taxpayers - would be untouched.
So why is there an "or" instead of an "and"? Why is the universe of super-tax payers broader than deposit-takers which are also dealers in investments?
I presume that there is some firm or category of firm that the Treasury and HMRC want to tax which would otherwise go untaxed.
But who would dodge the bullet if the definition of the relevant firms were narrowed?
I wondered whether the Treasury feared that pure investment banks such as Goldman Sachs would be excluded.
But if the "or" became an "and", Goldman would still have to cough up, because it is an authorised deposit taker in the UK.
I have to say that I am a bit stumped.
For a moment, I had pondered whether the Treasury was using the draft legislation to feel its way towards a formula for a permanent broader financial transaction tax that it would then endeavour to sell to the other leading economies of the G20.
But its work on that is separate (I will take a look at the Treasury's ideas for such a permanent financial industry tax or for a financial system quasi insurance levy in a later note).
I think therefore the best one can say is that the super-tax is a slightly amorphous organism which is still evolving - and probably needs to find its final shape fairly sharpish, before too many brokers and bankers have relocated to low-tax Zug.
PS. Just in case any of you have noticed the remarks made today by Royal Bank of Scotland's chairman Sir Philip Hampton that "there have been no threatened mass resignations of the board", his statement is completely consistent with what I wrote last week (see "RBS board to quit if chancellor vetoes £1.5bn in bonuses").