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


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The Independent Online

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."