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Darling plans windfall tax on bonuses

The Chancellor Alistair Darling is tipped to unveil a windfall tax on banks which pay extraordinarily high bonuses in the pre-Budget report this week.

The tax is expected to last for just one year and could either take the form of a supertax on bonuses or a larger employers’ National Insurance charge on the banks.

Speaking on the BBC’s Andrew Marr show yesterday, Darling said: “We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what’s going on.”

The news follows directors of Royal Bank of Scotland’s threat to resign the Government blocks their move to pay a reported £1.5bn in bonuses to investment staff.

Conservative Shadow Chancellor George Osborne has said he would not rule out a windfall tax on bonuses.

Liberal Democrat Shadow Chancellor, Vince Cable says: “There is a complete lack of clarity at the heart of the Labour and Tory approaches to banks.

“The simple and correct approach, since many banks are returning to high levels of profitability, is for banks to pay for the taxpayer guarantee that they currently enjoy.

“A 10 per cent levy on bank profits would raise around £2bn in current conditions and would go to paying down the deficit.

“This is a much more effective solution than a one off levy and recognises the debt that the banks owe to the taxpayer.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. You must be joking 7th December 2009 at 9:34 am

    This is another great example of the left and right hand acting with no regard for each other.

    A week or so ago, the FSA were given authority to restrict bank bonuses.

    Now we have Darling proposing to tax bank bonuses.

    Come on boys, you can’t do both!

    If the FSA restrict them, there will be nothing there to tax and thus no further revenue…

    Stop blowing hot and cold and talkin complete bull**** and come up with a meaningful way to pay down the government defecit!

  2. Again the Government jump in with half baked plans to ” punish” the bankers.
    We all know that the tax lawyers will mitigate the situation to a nill pay-out by the bankers on their bonuses which the Government said they would not allow a short while ago.
    FSA ,New Labour and the bankers, they couldn’t organise one in a brewery.

  3. I may be just a simple soul, but I simply don’t understand why everyone refers to the current state of affairs as the public debt crisis. It isn’t ~ it’s a bank debt crisis.

    Several of the banks are massively in debt to the public purse and therefore all profits should be applied to repay that debt. No tax, no bonuses, no pay rises, just repayment of debt. Why should the public have to suffer tax rises to repay money that the banks owe to the national exchequer? It seems to me just completely crazy and all the (bailed out) banks want to do is carry on as though nothing had gone wrong. If they lose to competitors a few high powered people from their Investment Banking side, then so be it ~ it’s their own fault and a consequence of chronic mismanagement.

    What kind of government do we have that allows such a state of affairs to continue (apart from having allowed it all to blow up in the first place)?

  4. ‘If they lose to competitors a few high powered people from their Investment Banking side, then so be it ~ it’s their own fault and a consequence of chronic mismanagement.’

    This might actually be a good thing, the bank is forced to move towards doing what it was originally set up to do and the Investment Bankers do whatever they do for a different company. Let them leave!

    The announcemt has nothing to do with tax, just headlines to grab votes. They already know it will solve nowt.

  5. Julian Stevens has a point, can you imagine how a bank might react if one of its commercial customers said sorry we can’t afford to repay your loan in full because we have a culture of rewarding failure at our firm by paying highly regarded staff bonuses . Hmm!

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