UK hits bank employees with 50% bonus tax - "We hope it will be a disincentive for banks to pay bonuses"

[w¡n9Nµ7 §£@¥€r 123]

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.

...

There is a widespread expectation ... that the windfall tax will prompt London-based bankers to ask for their contracts to amended to attach them to other financial centres, such as Zurich, Paris and Frankfurt.

http://www.ft.com/cms/s/0/6284fdba-e4c3-11...?nclick_check=1

[Darnell 8,479]

Ya always think - bankers? what?

It's really not, right ?

It's the top echelon of the sales-boys, who work at the bank, not do counter-work for walk in clients.

Usually is 'product-based' , for some banks, can be investment-based as well.

I don't have any problem with this - whatsoever.

If yer a top-performer , you won't either.

[w¡n9Nµ7 §£@¥€r 123]

Ya always think - bankers? what?

It's really not, right ?

????

[SMR 368]

The problem is, in some professions, including banking, people have smaller salaries and larger bonuses. Bonuses should be subject to the same income tax as salaries. A 25,000 pound bonus seems huge but it isn't so large once you consider that the person receiving it may have a much lower salary. Bonuses are a way to implement a more performance based rewards structure. That doesn't mean we need to tax them at a higher rate.

[w¡n9Nµ7 §£@¥€r 123]

The problem is, in some professions, including banking, people have smaller salaries and larger bonuses. Bonuses should be subject to the same income tax as salaries. A 25,000 pound bonus seems huge but it isn't so large once you consider that the person receiving it may have a much lower salary. Bonuses are a way to implement a more performance based rewards structure. That doesn't mean we need to tax them at a higher rate.

I agree. Taxing bonuses at higher rates is wrong. In many industries (banking is one of them, there are others) the bonus is an expected part of compensation for the high performer. It would suck if you work hard all year and then right during bonus season the government decides to take away half.

[Darnell 8,479]

if yer watching the parliament debates about this, you know whats going on.

fwiw - this tax is not on 'contractual bonus ' types, but on 'windfall bonus' types.

[w¡n9Nµ7 §£@¥€r 123]

if yer watching the parliament debates about this, you know whats going on.

fwiw - this tax is not on 'contractual bonus ' types, but on 'windfall bonus' types.

In the industry I've spent most of my career in (not banking), an employee gets a bonus some years, and not others. There's nothing in the contract that requires it. If he/she gets a bonus, it's because the company did well enough as a whole to create a bonus pool AND because the recipient exceeded performance expectations.

I don't know what you mean by a windfall bonus, but there's nothing contractual about this kind of bonus. Taxing it at rates higher than you'd tax regular wages is still wrong.

[SMR 368]

if yer watching the parliament debates about this, you know whats going on.

fwiw - this tax is not on 'contractual bonus ' types, but on 'windfall bonus' types.

In the industry I've spent most of my career in (not banking), an employee gets a bonus some years, and not others. There's nothing in the contract that requires it. If he/she gets a bonus, it's because the company did well enough as a whole to create a bonus pool AND because the recipient exceeded performance expectations.

I don't know what you mean by a windfall bonus, but there's nothing contractual about this kind of bonus. Taxing it at rates higher than you'd tax regular wages is still wrong.

Agreed. If a company has a good year, why should we discourage it from awarding its employees? Should the shareholders get it all?

Whether or not higher paid workers should be taxed more is a different debate. But it makes no sense to tax someone more because they got a million dollar bonus instead of a million dollar salary.

[Dan J 277]

if yer watching the parliament debates about this, you know whats going on.

fwiw - this tax is not on 'contractual bonus ' types, but on 'windfall bonus' types.

In the industry I've spent most of my career in (not banking), an employee gets a bonus some years, and not others. There's nothing in the contract that requires it. If he/she gets a bonus, it's because the company did well enough as a whole to create a bonus pool AND because the recipient exceeded performance expectations.

I don't know what you mean by a windfall bonus, but there's nothing contractual about this kind of bonus. Taxing it at rates higher than you'd tax regular wages is still wrong.

But a yearly bonus encourages making very risky short term bets that may fall apart in the future. For the employee who executes that transaction, it doesnt matter, they were rewarded for the short term benefit.

I think the bonus should be banked and paid out over 5 years. If a deal falls apart and the company looses because of it, they loose the remainder of the bonus.

[sly_wolf 199]

The problem is, in some professions, including banking, people have smaller salaries and larger bonuses. Bonuses should be subject to the same income tax as salaries. A 25,000 pound bonus seems huge but it isn't so large once you consider that the person receiving it may have a much lower salary. Bonuses are a way to implement a more performance based rewards structure. That doesn't mean we need to tax them at a higher rate.

I agree. Taxing bonuses at higher rates is wrong. In many industries (banking is one of them, there are others) the bonus is an expected part of compensation for the high performer. It would suck if you work hard all year and then right during bonus season the government decides to take away half.

I dont understand what the big news is here. In Canada (Quebec) my bonus was always taxed at 50% and I am only at the professional level. I say let the big boys pay for it too.

[SMR 368]

if yer watching the parliament debates about this, you know whats going on.

fwiw - this tax is not on 'contractual bonus ' types, but on 'windfall bonus' types.

In the industry I've spent most of my career in (not banking), an employee gets a bonus some years, and not others. There's nothing in the contract that requires it. If he/she gets a bonus, it's because the company did well enough as a whole to create a bonus pool AND because the recipient exceeded performance expectations.

I don't know what you mean by a windfall bonus, but there's nothing contractual about this kind of bonus. Taxing it at rates higher than you'd tax regular wages is still wrong.

But a yearly bonus encourages making very risky short term bets that may fall apart in the future. For the employee who executes that transaction, it doesnt matter, they were rewarded for the short term benefit.

I think the bonus should be banked and paid out over 5 years. If a deal falls apart and the company looses because of it, they loose the remainder of the bonus.

All that means is that the bonuses aren't based on a good system. That has nothing to do with taxing them.

Edited December 9, 2009 by SMR

[mawilson 2,133]

All that means is that the bonuses aren't based on a good system. That has nothing to do with taxing them.

[w¡n9Nµ7 §£@¥€r 123]

France Said to Consider Following U.K. Bank Bonus Tax

Dec. 10 (Bloomberg) -- French President Nicolas Sarkozy is considering a tax on 2009 banker bonuses exceeding 27,000 euros ($39,800), following the U.K. government’s introduction of a similar levy, said two French government officials.

French banks would pay the charge, though the rate hasn’t been set, said the officials, who declined to be identified because they’re not authorized to speak to the press.

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U.S. Probably Will Avoid Matching U.K. 50% Bonus Tax

Dec. 9 (Bloomberg) -- U.S. lawmakers already wary of expanding the government’s role in running financial companies probably will avoid matching the U.K.’s tax on banker bonuses.

“We don’t think it is at all likely that Treasury-IRS would impose a 50 percent tax on banker bonuses,” said David Schmidt, a senior consultant for New York-based compensation firm James F. Reda & Associates. “This pay cut would likely cause an exodus of talent.”

[Dan J 277]

U.S. Probably Will Avoid Matching U.K. 50% Bonus Tax

Dec. 9 (Bloomberg) -- U.S. lawmakers already wary of expanding the government’s role in running financial companies probably will avoid matching the U.K.’s tax on banker bonuses.

“We don’t think it is at all likely that Treasury-IRS would impose a 50 percent tax on banker bonuses,” said David Schmidt, a senior consultant for New York-based compensation firm James F. Reda & Associates. “This pay cut would likely cause an exodus of talent.”

To where? Everyone else is doing it too