Bank of England boss Sir Mervyn King slates bank bonus tax move

 

Bank of England Governor Sir Mervyn King today said it would be “depressing” if bankers choose to defer their bonuses until after the introduction of the new 45p income tax rate.

And he warned the banks that they risk provoking anger from the rest of society if they take the step to dodge paying tax on their bonuses at the current 50p top rate.

Reports have suggested that banks including Goldman Sachs are considering delaying bonuses until after April 6 to take advantage of the cut in the rate announced by Chancellor George Osborne in last year's budget.

The move could cost the Treasury of millions of pounds.

Asked about the reports today, Sir Mervyn told the House of Commons Treasury Committee: "I find it a bit depressing that people who earn so much seem to think it is even more exciting to adjust the timing of it to get the benefit of a lower tax rate... knowing that this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the crisis.

"I don't know what will happen, and they haven't made any statement, but I think it will be clumsy and lacking in care and attention to how other people might react.

"In the long run, financial institutions ... do depend on goodwill from the rest of society. They can't just exist on their own."

Sir Mervyn said that it would not be "unlawful" for banks to defer bonus payments in this way.

The reported move by Goldman Sachs was also condemned by the chairman of the Commons Public Accounts Committee, Margaret Hodge.

"What we are seeing now is the immoral situation whereby people who earn a lot of money just believe it's cool not to pay tax," she told The Times.

"It fails to understand the importance of everyone contributing to the common good and Goldman Sachs just don't get it. they feel no responsibility for paying their fair share of tax."

Labour Treasury Committee member Teresa Pearce prompted Sir Mervyn's comments by asking him whether deferring bonuses to take advantage of the lower tax rate was "ordinary tax planning or... morally repugnant".

Sir Mervyn said that investment banks were "in a privileged position because a lot of their compensation comes in the form of a bonus, the timing of which can be adjusted".

This meant that they were able to exploit changes in the tax regime to their own benefit, by choosing which financial year to receive payments in.

He pointed out that the investment bankers involved will anyway benefit from the new 45p rate "in the long run to a very great extent".

David Hillman, spokesman for the Robin Hood Tax campaign for a financial transactions tax, said: "Good on the Governor for slapping the wrists of Goldman Sachs, but why is the Government keeping schtum about a tax sleight of hand that will cost them (and us) millions?"

"It's only the start of bonus season and already banks are stirring controversy with their disconnect from the rest of society - it's time the Government got a grip."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living