Thursday, December 10, 2009

Britain has a "one-time" tax of 50% on bonuses over $40,000

I don't really have a thumb on British politics, but I think I can safely say most American commentators were a little surprised by this move.

Chancellor of the Exchequer Alistair Darling gave a pre-budget report to Parliament yesterday in London. During the speech he announced a one-time 50% tax on bonuses paid in the banking sector that are the equivalent of $40,700 and over. All banks are affected: whether they accepted British government funds or not, and whether they are British or not. If you're a bank with an office in London, you're British employees are paying this tax.

I am not going to conjecture as to the impetus behind this policy; plenty of other commentators are. Rationales include: trying to close Britain's deficit, recouping some of the money spent to buttress the British financial system, or perhaps a political gesture for the large bonuses that are anticipated to be cut at year's end (and the subsequent populist fall-out). I haven't, however, read too many commentators opining this is an adept method to curb banker risk-taking, which I thought was the universally identified boogey-man for the economic crisis ...

It's being reported everywhere, including at Bloomberg, theNYTimes, and the WSJ.

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