the visible hand

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UK: 50 per cent tax on bank bonuses

Posted by ecoshift on December 9, 2009

It was the government’s money anyway… / UK / Politics & policy – Banks hit by 50% tax on bonus pay-outs

Banks will be hit by a 50 per cent tax on bonus pay-outs, Alistair Darling, the chancellor, said in his pre-Budget report, in a move that will inflame bankers but is likely to be welcomed by the general public.

The first £25,000 of bonuses will be exempt from the tax.

The Treasury estimates that the measure – which comes into immediate effect and runs until April 5 next year – will affect 20,000 bankers. Lord Myners, the City minister, recently estimated that 5,000 bankers earn more than £1m in bonuses.

“We hope it will be a disincentive for banks to pay bonuses,” said one Treasury official.

The windfall tax – which politicians argue is justified, as banks have generated excess profits as a direct, or indirect, result of the bail-out of the banking system – will apply to all banks and building societies, including groups that operate in the UK under a European Union branch system.

The tax, to be paid by banks, will be levied on top of the marginal tax applied to individuals’ bonuses.


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