Remember the ‘bonus tax’? Between December 2009 and April 2010, Britain’s Labour government introduced a 50% tax (paid by employers) on bonuses above £25k. If a Labour government is elected in 2015, this tax will be making a comeback. And next time it will be more than a five month phenomena.
Ed Balls, Labour’s putative chancellor, said yesterday that the Labour Party will be imposing a bonus tax for two consecutive years if it wins the election in 2015. In doing so, it hopes to raise £1.5bn-£2bn a year according to the Financial Times. This money will be dedicated to creating jobs for unemployed young people.
So far, so good. Except the Labour party’s banker-bashing pathology is likely to come unstuck if applied too vigorously. When the bonus tax was enforced in 2010 it raised £2.3bn. However, this was precisely because the tax was a one-off occurrence: banks didn’t bother altering their compensation structures to dodge it, although some did attempt to delay payments until May. A two year tax, which could easily morph into something more enduring, would be a different creature and one likely to encourage more vigorous mitigation.
It’s also worth noting that the EU’s bonus cap hadn’t been introduced in 2010. Nor had the British banking levy. The bonus cap means that banks in the City of London have already been forced to cut bonuses and to increase fixed pay. And the British banking levy is already an effective tax on doing business in the City. Push it too hard and at some point the milk cow will lie down and stop producing.
Separately, a Dubai advertising agency has found a way of attracting top people without paying headhunters’ fees: it’s been sending them books with mobile telephones embedded inside. The phones are programmed to call the agency. We suggest a similar technique might be used on investment bankers. Just don’t send them Blackberries.
The Tories said Labour had spent “10 times over” their proposed bankers’ bonus tax, which is now earmarked wholly to guarantee taxpayer-funded jobs for those aged 18 to 24 who have been out of work for a year. (Financial Times)
The bonus tax was going to pay for childcare not long ago. (Order Order)
Fidelity would like to object to Barclays’ bonuses. (City Am)
Shock discovery: clients in Asia don't like paying M&A fees. (Bloomberg)
If you’re a banker today, many who once looked up to you as a success now think you’re evil. (NYPost)
Women who can do maths still don’t get hired. (Economix)
Sexism, nepotism, cage fighting and assassination – where you don’t want to work in finance. Recruiters get their sums wrong
Bank dumps M&A juniors, says experienced staff needed now. Goldman Sachs gloats in public
Confusion as Goldman hires JPM man into job someone else already has