PRE BUDGET REPORT - 90% TAX ON BANKERS BONUSES!is this worth it anymore

HM Treasury
#1

I dont know if anyone here has heard yet but according to Alistair Darling’s Pre Budget Report bankers (what a generic and stupid political term) will have to pay 40% on their bonus and thats after the bank pays 50% of it to the government anyway.

So a portfolio manager for example who put in 60 hours a week and more so in to making the most of their clients assets; who would have been given a well deserved bonus of £200,000 will only recieve £20,000 in his hands…

So why do we all want to go through all this inner temoil to earn the same amount money as some beaurocrat working for HM Treasury as a finance manager. I predict a mass exodus overseas and I believe we should all be the first to join…

I would suggest we all begin applications to divisions in america or asia where the bankers are still recognised as key to the engine that is the capitalist economy; and politician’s do not surrender to the whim of the everyday man who in my opinion in the UK at least is an uneducated oaf that reads the daily mail and has no place in dictating economic issues

Tell me guys, am I just being delusional or do I have a point?

#2

You have a point. Darling is nuts. Not only that but we are about to get immenently whacked by the credit rating agencies for failure to reduce public expenditure. We’ll be paying 10p per each tax pound on interest by 2011. Ridiculous.

Labour policy from their perspective, however makes complete sense because they know, that by taxing bankers and continuing to pay out benefit payments for the lazy, liberal, left-wing labour voters, they’ll be sure to get another 4 years!

Of course, as the some of the most innovative and talented people work in financial services, ways will be found to avoid ridiculous tax liabilities on bonus payments. So in effect, Darling’s plans just piss off the ‘talent’ and force them abroad, like you say. Nonsense policy.

From the research I’ve done into our financial system, it seems that a key down-side to our fractional-reserve debt based banking system is the need for a business cycle to expunge the ever increasing piles of unpaid debt. The ‘bailouts’ have just altered the cycle by making the impending depression much more severe than it would have been if private debt was defaulted upon and not transferred to the public balance sheet.

Zimbabwe in 5 years!

#3

If i remember correctly the tax was 50% of any amount over a threshold of £25000 as well as only being a one off levy, so will only have an impact on this year.

In your example the manager would normally recieve £120,000 after he has been taxed.

This year he will only receive, £25,000 then the £175000 will be taxed by 50% leaving 87500 plus the 25000 which will then be taxed on income by probable min depending on his total income 40%.

That means a total net bonus income of £67500. So he is losing only around half of his net bonus he would have got normally. (Using averages etc - realise that different tax rates at 20,40,50% might change this slightly but shows principle).

This will only hit those earning bonuses in millions (i.e. bosses) the hardest. And not substantially those general ‘bankers.’

#4

This is ridiculous!!! I want all the banks for move out of this god forsaken country!

#5

Ita not as straight forward as that. PLease refer to the income tax book for 2010 (will be out by February 2010); 2009 is out of date but will provide you with some basics. Neverthless, this taxing is inappropriate and unjustified. It just means we have to work harder and make more profit; so even after tax we can have a decent bonus.

Moreover, yes money and power is probably the biggest motivator but if those are the sole reasons and one do not realise the importance of London as a financial hub than you willl not last here for too long. Things will change when Conservatives will come in power; so be patient and keep working hard.

#6

what the banks will probably do is just give larger bonsues to compensate for the tax.

#7

@123i, @LilShorty

The banks must give 50% of whatever bonuses to the government; so in essense if goldman sachs bonus pot for the UK division is £10 billion; they wont pay the tax from the banks own revenue, they will cut it off the pot!
so this will drop the pot to £5 billion; then each banker must pay 40% tax on the amount they get so to be exact they only recieve 20% of the original they would have recieved. I’m not too sure how long it will last for, they may say its only for one year; but all it’ll take is for some over achieving conservative to promise to extend it…then what?

#8

Windfall taxes are one year … simples … and your calculation of the percentages is wrong.

If you’re that concerned about the way the Goverment applies taxes to control its fiscal policy and its impact on your ‘potential’ earnings then follow your logic and emigrate.

lil. x

#9

Lots of emotions there from Maac_x

Why would anyone see this as a surprise anyways. The current political climate and the anger from the public is expected. Besides, your example:

“So a portfolio manager for example who put in 60 hours a week and more so in to making the most of their clients assets; who would have been given a well deserved bonus of £200,000 will only recieve £20,000 in his hands…”

You are not taking in the consideration of how Bonuses could be structured and the first £25,000 are exempt from this. In addition even if it was £200,000 bonus where 50% is taken away that leaves £100,000 bonus pot. Lets say 50% tax rate (assuming he is high earner of above £150k) meaning he or she would have £50,000 left.

Even then, there will be lot of creative thinking on how to try mitigate this one off tax. Is it fair? Not really as it is so far too general and makes London city workers thinking about how to minimise their exposure in UK tax or moving away. Anyhow if money was this important to you then perhaps you should consider again are you working just for money because you do need to enjoy your work as well…

I understand it isn’t the best thing in the world but you wouldn’t be really having a poor standard of living if you are in the position of being harmed heavily by this bonus scheme.

For me work is also needs to be fun and I am passionate about the financial market. Whether there is tax or not on bonus doesn’t matter, its important to develop yourself and then think about it in the long run.

Unless you are only thinking about earning millions upon millions of money then sure move to lower tax havens. I would had assumed most of the people like my friends have already shifted lot of their assets elsewhere, which was natural even before this bonus tax issue came to light.

As i like to put it.

Have a happy

“taXmas”

:wink:

#10

Amen, Nerva10; I just have to second you twice in 5 minutes (just secoded your post on HSBC thread). By the time you are considered for £200000 bonus you will know enough tricks to minimise your tax exposure! If you know what I mean. A tax joke from an American brother/sister:

To: Internal Revenue Service, Department of the Treasury Washington, DC 20001

Enclosed is my 2003 Form 1040, together with payment. Please take note of the attached article from USA Today archives. In the article, you will note that the Pentagon paid $171.50 each for hammers and NASA paid $600.00 each for toilet seats.

Please find enclosed in this package four toilet seats (value $2,400.00) and six hammers (value $1,029.00). This is in payment for my total tax due of $3,429.00.

Out of a sense of patriotic duty, and to assist in the political purification of our government, I am also enclosing a 1.5 inch Phillips head screw, for which HUD duly recorded and approved a purchase value of $22.00, as my contribution to fulfill the Presidential Election Fund option on Form 1040.

It has been a pleasure to pay my taxes this year, and I look forward to paying them again next year in accordance with officially established government values.

Sincerely,
Another satisfied taxpayer

#11

hehe that sounds about right Aj, I would wish I could donate some left over pens I received from the careers fairs to UK Govt to reduce my tax. In all seriousness, the next few years of tax increases won’t make us feel rosy=P

I would start preparing to lower any mortgage plans since interest rates will have to go up one stage and could also lead to another housing mess if that also increases defaults again and with lower spending and increased taxes due to higher debt amount to service…is worrying.