Are British bankers headed to the pub early today to drown their sorrows? Little doubt, as the Chancellor of the Exchequer Alistair Darling (British equivalent to Treasury Secretary Tim Geithner) announced that year-end bonus pools for British banks will be hit with a one-time, top line tax of 50%!! Ouch!!
Bloomberg provides a brief synopsis this morning in writing, Darling Levies 50% Tax on U.K. Bank Bonuses Above 25,000 Pounds:
Chancellor of the Exchequer Alistair Darling said he will impose a one-time 50 percent tax on banks for all bonus payments of more than 25,000 pounds ($41,000).
The tax, effective from today until April 5, will be levied as a surcharge on the employer. It will apply to all banks and building societies operating in the U.K., including subsidiaries of foreign banks.
The Treasury estimates the tax will raise about 500 million pounds and affect about 20,000 bankers.
What does this mean? Take 50% off the top line of the bonus pool and then distribute the balance. Those bonus proceeds are then subject to the U.K.’s current tax rates, the maximum of which is right now 40%.
Add it all up and the effective tax rate for the majority of the bankers impacted is between 65 and 70%!!
What does the crowd in Washington and on Wall Street think about that?
While I am not one for increasing taxes, the fact is the British banks and the U.S. banks were saved by the taxpayers. This tax is merely a return of some of the taxpayers’ money.
While the bankers will view Darling as Mr. Grinch, do you think the unemployed laborer in the U.K. or here in America has any real sympathy for those in the City or on Wall Street?
Would the crowd in Washington have the stones to impose a similar one-time hit on Wall Street?