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
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Emily McDowell Card that reads:
artCancer survivor Emily McDowell kicks back at the clichés
Sport
footballShirt then goes on sale on Gumtree
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvBadalamenti on board for third series
Life and Style
tech
Sport
Standing room only: the terraces at Villa Park in 1935
football
Sport
Ben Stokes celebrates with his team mates after bowling Brendon McCullum
sportEngland vs New Zealand report
News
Amal Clooney has joined the legal team defending 'The Hooden Men'
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine