The going rate for Goldman

Goldman Sachs sign Goldman has been bailed out by US taxpayers in the past

There seems to be a prevailing view that it is little short of scandalous that Goldman Sachs in the UK may defer the handing over of shares to its executives, so that they would be liable to next year's income tax rate of 45% on the payments rather than this year's 50% (see this morning's FT for more on this).

Given the size of Goldman's historic bonus pools, the value of these shares would certainly run to tens of millions of pounds, and probably to hundreds of millions of pounds, so the tax saving would not be trivial - perhaps double digit millions of pounds (Goldman won't confirm the quantum).

To be clear, what Goldman is considering in this case is not opaque and highly complex tax planning, designed to bamboozle the tax man. It is not sophisticated tax avoidance, or financial engineering of the sort - arguably - that too many banks and bankers have indulged in.

The global investment bank is contemplating delaying for a few weeks the handing over of shares to staff that they were awarded in 2009, 2010 and 2011 but have not received yet.

This kind of adjustment of payment schedules is neither unusual nor confined to bankers: it is being contemplated right now by all manner of businesses, big and small, as the top-rate income tax cut looms; if that weren't the case, then the basic rules of business behaviour would have been rewritten.

So the noise around Goldman raises two interesting questions.

First, do we now expect a higher standard of behaviour from banks than from other businesses, such as architects or law firms or those in private medicine?

That might be a reasonable expectation, given that big banks such as Goldman have been bailed out by taxpayers in the past and doubtless will be again (for all the current spate of reforms designed to cut them free).

If banks benefit from permanent state protection against collapse, then perhaps we need to make explicit that there is a contract between banks and state that they should never ever take steps to reduce their tax burden.

On the other hand, if Goldman is too big to fail, it is US taxpayers - rather than British ones - that are its main underwriters.

Second, is there a new rule of good corporate citizenship that any business or business person should pay the highest prevailing rate of tax possible, even if there is an easy and legal way of paying less tax?

Apparently when David Cameron had one of his regular meetings with business leaders on Friday, he told the assembled corporate eminences that they had a moral duty to ensure their companies paid the full corporation tax rate, given that the government has been cutting that rate and continues to do so.

According to one multinational boss, he was in essence saying that paying corporation tax is a part of a business's corporate social responsibility (CSR).

This carries two perhaps unfortunate implications.

First is that the prime minister appears to feel more or less powerless to use much more than moral suasion to ensure the biggest, most internationally mobile companies pay the going rate.

And if paying tax is part of CSR, then the public sector is being characterised - in essence - as a charitable good cause.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 143.

    Overpaid, overhere running a Company near you.
    And paying as Tax as they possibly can.

    All in it together ! I'll remember that one.

  • rate this

    Comment number 142.

    Wrong way of looking at it. What many people posting under the politics of envy Labour fostered is having to pay out over HALF of your earnings in taxes (employee/ER NIC are taxes too) leaves many looking for exit.
    50% tax rate should never have been brought in- 40% brings in way more tax as proved years ago sits better with those that have to bear it. Reduce spending, stop raising taxes.

  • Comment number 141.

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

  • rate this

    Comment number 140.

    Pretty fightening stuff when you consider Goldman-Sachs alumni spin through the spinning door to the Whitehouse & spin back out again - as if though they owned the US economy...which maybe they think they do.
    Goldman Assets: $114,693,000,000
    Exposure To Derivatives: $41,580,395,000,000.
    Goldman total exposure to derivatives contracts that is more than 362 times greater than assets.

  • rate this

    Comment number 139.

    David Cameron did what!
    He told assembled corporate eminences they had a moral duty to ensure their companies paid the full corporation tax rate, given the govt has been cutting rate &continues to do so.
    How long will it take Cameron to learn that investment banks too big to fail have no moral duties (not even to their own employees). The govt must close all loopholes & slam the barn door!

  • rate this

    Comment number 138.

    I cant understand why people are so surprised by these deferring tactics. These companies are the top in the world at making money and avoiding losses. If the possibility is there then of course they will go out of there way to avoid an unnecessary loss for their employees/ themselves.
    You can't blame the banks, the competitive world as a whole has created this bonus culture.

  • rate this

    Comment number 137.

    Sorry, forgot to add (400 char restrict causes problems!), assume if nothing else changes then:
    1. Cut of top IT rate to 45% halves tax take, and,
    2. Restoration to 50% doubles tax take.

    GO gave up tax receipts - however you slice'n'dice it. Inescapable -despite TreasSec's & PartyChair's nonsense explanations. See my post below how he had to restore tax take smartish!

  • rate this

    Comment number 136.

    Robert, you make a good point. In fact ALL the tax avoidance schemes were devised by accountants and lawyers, some of the most highly paid people in the country. Ireland is one of the worst offenders by having a coproration tax rate of just 12.5 % when every other European country is in excess of 20%! Don't blame the companies, blame the European Community.

  • rate this

    Comment number 135.

    companies such as Starbucks, Amazon and now banking, who pay bonuses to avoid tax liability. It’s about time Cameron and his treasury department made a serious effort to block these massive loop holes corporations seem to be using. Then perhaps we, the taxpaying public, would not feel such a soft target shoring up a lost cause in reducing our national debt.

  • rate this

    Comment number 134.

    You are assuming that all of the 75% have disposable income to invest in start-up schemes. If they did - & more importantly do - it doesn't matter what the top rate of IT is.

    So why all the fuss?

    And, much more important, why did GO claw it back by stealth in December?

  • rate this

    Comment number 133.

    Are these bankers employed (PAYE) or self employed? The bonus may have been written into their contract of employment, in which case the payments held back would have been subject to a significant change of contract terms and therefore required a consultation period of 13 weeks before any change to the contract took place.
    Surely this would be another change and require another consultation.

  • rate this

    Comment number 132.

    The best way for the government to act is vote with their feet like any other customer by not giving Goldman Sachs ANY government advisory work. Public protest worked to a degree with Starbuck - I still won't drink there as their offer to pay £10m is derisorary.

  • rate this

    Comment number 131.

    What did they actually get the bonuses for?
    Much more interesting question
    If it is simply part of their wages, then they should pay the tax rate appropriate to the year it was 'earned' in
    What will they do if the government puts tax up? Backdate it?

  • rate this

    Comment number 130.


    I am not convinced that companies will start paying two people to do the same job just because they have saved money on one salary. This in turn will not spread the wealth but just put more money in the company's back pocket.

    All I see is reduced income tax revenues and less money spent in the economy.

  • rate this

    Comment number 129.

    Goldman Sachs must know

    Truths of business & regulation

    Inconvenient for a few

    Liberating hope for all

    Since calculation of advantage is 'central to business', its effective 'regulation' - against inappropriate risk-taking & corruption - requires complete removal of conflict of interest, for every player, our agreement to equal partnership, sharing in the national / regional / global interest

  • rate this

    Comment number 128.

    Not "fraud"?

    Recall reputable life assurer 'guarantees'? Courts backed those with guarantees, at expense of those with trust?

    Recall minister Francis Maude, 'when circumstances change', cutting pension inflation-link, trusted for decades over direct investments?

    Conflict of interest ubiquitous, corruption everyday, central to scandals & crises, including the worst

  • rate this

    Comment number 127.

    Yes its scandalous almost as bad as MPs trying to give themselves a 35% pay rise. All the 1% are greedy its time for the 99% to rise up. Bring on the revolution.

  • rate this

    Comment number 126.

    This government has no balls when it comes to the banks. They have no problem changing the rules to suit their agenda when it comes to ordinary peoples pensions. They have no problem screwing over the people they are supposed to represent. We have no power as both governments are only interested in self preservation. The system is rotten to the core.

  • rate this

    Comment number 125.

    Goldman Sachs the infamous bank that bets each way against its clients, why be surprised that the same bunch of leeches will do anything to avoid tax. Time this vile organisation was made persona non grata world wide.

  • rate this

    Comment number 124.

    The only subject discussed in the board room is survival. Witness Woolies, HMV, Comet, Jessops and many other recent bankruptcies.

    Bonuses/payment by results would have pevented many football clubs from going bankrupt and better rewarded the best players and given appropriate rewards to the worst players.


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