First Views on UK Bonus Tax

December 14, 2009 International Tax CooperationTaxation in EUTaxation in FranceTaxation in GermanyTaxation in UKTaxation in USA

Summit press conferenceThe first opinions and reviews have begun to be voiced, both internationally and within the UK, discussing details of a new tax on banking sector bonuses. As previously reported, on December 9th the Chancellor Alistair Darling in his Pre-Budget Report revealed that a new levy of 50 percent, will be charged on discretionary bonuses exceeding £25,000.

The extraordinary levels of bonuses in the banking industry, especially during times of financial turmoil has already been the subject of political and economical disputes for several months. The final decision announced by the Chancellor, and emerging details, have sparked intense debate. Although the idea is now garnering increasing support from international leaders. French President Nicolas Sarkozy stated on December 11th, while in a meeting with British Prime Minister Gordon Brown, that he intends for France to implement similar measures in 2010. German Chancellor Angela Merkel, stated that she is sympathetic to Alistair Darling’s attempts, and is awaiting the outcomes of its implementation. Both figures have previously voiced strong support of penalizing bonus payments, and implementing a financial transaction tax. Paul Volcker, former Federal Reserve Chairman and current adviser of US President Obama, has positively characterized the idea as “interesting”.

George Osborne, Shadow Chancellor, has commented on the tax “I’m not going to oppose it; I’m going to see whether it works in practice and we’ll judge it by its results”. Though Boris Johnson, London Mayor has claimed that the tax would heavily penalize the city, turning executives and large corporations away from the City of London and towards competing centers in Asia or US.

In an article co-written by President Nicolas Sarkozy and Prime Minister Gordon Brown, published in the Wall Street Journal on December 10th, they called for a restructuring of banking systems and the strengthening of the international financial systems, to lead to global growth. Commenting on his decision to join the UK in taxing bonuses, President Sarkozy again took up the cause, saying “We want and we wait for others to do the same, because we are in a globalized world”.

Photo by Downing Street