50% levy on bonuses above £25k

[susie100]

Suprised there is not a thread about this already (although I might have missed it)

Great vote winner, however I am really doubtful it will raise any significant revenue for the government as banks will simply raise basic salaries, turn their trading floors into hedge funds and re-employ people as consultants.

Crazy to be attacking the sector that provides 25% of tax revenues in my view (I am not a banker by the way!) but not applying to other financial institutions such as hedge funds or private equity firms or indeed other industries that pay people £££ such as consultancies. They all benefitted from cheap credit as much as the banks.

What does everyone else think?

I am sure it does mom2three that's why I think it will probably work out OK for the UK, but the problem as I see it is that the UK sold itself as a "knowledge economy" not much is really made here anymore. Which is fine when you have lots of money sloshing around the place from other industries, but if those industries do pack up and go all at once then it is going to sting.

There definitely is an element of "taking their ball and going home", but the problem is that they really are going to take the ball with them which means no more games until someone can make a new one. Which will happen but it will take years of lots of pain.

Also for us the choice to move overseas is a choice between being expats and looking for a new job. Which is fine we like moving about, but there are not a lot of jobs anywhere at the moment, so if corporate decide that they want him somewhere else we are going to go. A purely selfish decision, but there you go.

I think the thing that confuses me is that it seems to be a "heads we win, tails you lose" situation for the banking sector. If in the bad times, governments are going to step in and rescue the sector, surely this is a form of insurance and all firms in the sector should pay towards this? Ditto any other industry or business sector which would receive the same kind of govt assistance? Or have I missed something? Taking pot shots at individual bankers smacks of playing to the gallery and is extremely short-termist surely?

I am still genuinely interested in the idea that all the bankers will move away (and take their jobs with them).
Could a country like Switzerland actually support a financial industry like we have in London? Would it want one?

It has a population of only 7.5 million.

Would the taxpayers/Government of Switzerland WANT to put themselves in a position where thousands of high risk banks based themselves there - possibly needing to be bailed out again in 10 years time?

It would seem a crazy thing to me to actually encourage this in the form of tax breaks (Iceland anyone?)

is there anyone who is a taxpayer/resident of Switzerland on this thread? (long shot I i know !)
What do you think?

"If in the bad times, governments are going to step in and rescue the sector, surely this is a form of insurance and all firms in the sector should pay towards this?"

If that happened then the banks would simply relocate somewhere where there weren't such charges placed upon them.

I see what you're saying, this does seem to be a win-win situation for the banks, but I can't see what can really be done about it.

We've allowed our nation to become very dependent on an industry which can and will relocate itself at the drop of a hat.

A bank is a bit like a department store. There are hundreds of different products being bought and sold.

If someone in the toy department fancies making a quick buck and buys in a load of toys, only to find out they are fake and made out of toxic paint, you don't then sack the bloke in the electricals department who has been selling loads of tvs and making a fortune for the company.

The vast majority of this crisis centred around American sub-prime debt which had been repackaged and sold on by people who were blinded by the dollar signs which could potentially be made.

They lost their employers a hell of a lot of money, and I would hope they have been punished for their mistakes.

But this idea that banks are staffed by indenikit 'bankers' who are all equally as guilty is just utterly false.

For example, if it hadn't been for 1 team in the American office, Lehman brothers would have made a profit in the year it went bust. As it was, the cock up by one team was SO huge as to cause the entire organisation to fold.
But do you really punish someone who has done their job as required and made their employer a shed load of profit because someone in another division in another office screwed up?

"I am still genuinely interested in the idea that all the bankers will move away (and take their jobs with them). Could a country like Switzerland actually support a financial industry like we have in London? Would it want one?"

In "normal" circumstances the financial sector doesn't need a lot of support and in return they pay an awful lot of tax.

If another country is already rolling along quite happily then it will welcome the tax and won't be in a position where if those industries fail then they need to prop them up, they'll just go back to how they used to support themselves.

Riven has a good point about investing in and allowing other industries to grow. We shouldn't be so dependent on any one sector that we can't allow them to fail or leave. That's especially true for banking, moving a factory is hard, moving a desk in an office is easy.

I agree Riven if the UK doesn't want to be a knowledge economy anymore because of the risks (which is fine) then there is going to have to be a shift towards manufacturing, but as I said that is going to hurt because everything has been outsourced over the years and it is going to take time.

It doesn't have to be Switzerland, there are plenty of little countries around the world who could provide somewhere and it is only a matter of time before they start doing so. The UK did it and lots of people shifted here, there is no reason why the shift can't work in other directions.

yes, BA, but where would they go.

We are all making the assumption that every other country in the world is begging to take our bankers off us.

maybe they are..

I certainly think some asian nations might be very interested in being the new financial hub of the world - India/Mumbai perhaps - but would all our super rich bankers want to locate to India?
Maybe they would.

I agree we are over reliant on the banking sector in general and that is NOT A GOOD THING and therefore it may be a very good thing if some banks/hedge funds do relocate elsewhere to reduce this reliance/wean us off if you like

No, you sack the guilty but everyone has to tighten their belts just like most industries.

This only works when there aren't rival companies prepared to offer big pay packages to tempt the most profitable workers to them.
Every bank wants to have the superstar traders working for them, and will offer what it can to tempt them over. If that isn't allowed to happen in the UK, the offers will come from overseas.

As I said in my OP, the bloke working for RBS singlehandedly making £50m for his company can carry on doing it, and giving the company the ability to pay back the money. Or he can clear off to Zurich or Paris or Hong Kong and make that £50m for a foriegn bank because they are the ones prepared to pay him a bonus.
Which would you rather happens?

but don't time zones have a part to play too?

If banks spread themselves all over the world, in lots of little countries then time zones would be very problematic. isn't that one of the reasons why they want to be based geographically together as much as possible.

Nope, time zones not an issue. You don't actually need to speak with someone to do business with them and many bankers (i.e. DH) are already on 24 hours a day.

Also right now Western Europe is an important time zone, if the money moves then so will the importance of the time zone.

Molly, it might be that we are in a 'all our eggs in one basket' situation with the financial services industry, but what would you personally be prepared to do to plug the taxation revenue gap left behind if they go?

Pay more income tax? Have your DCs class size go up? Abolish the NHS?

It is all very well saying how awful it is that we are held to ransom by these horrible greedy banks, but the reality is no one would actually vote in a party who said they would kick out bankers, but in return, we don't get free healthcare or all sure start centres close tomorrow.

When I said insurance, I was thinking about a global scheme tbh. Sorting out the mess last year seemed to be done on a fairly global basis didn't it?

The world can't even agree on not poisoning the planet anymore. What makes you think a global taxation/insurance idea would get anywhere? Too many different cultures/ideas/ideals for that and you can't go dictating other countries' taxation arrangements.

OK, worth a try

actually yes I would pay more income tax!

I guess I come from the assumption that we are a society and should all pay towards it's upkeep and support the most vulnerable and I am happy to pay my share.

Yes a global scheme would be a good idea, however it's going to be hard to get anything implemented.

There's just so many separate national interests at play, from those countries trying to encourage the banks to them to those that can't afford for them to go, that agreement on anything substantial just doesn't seem possible.

I'm surprised how many people keep asking "where will the bankers go?" You have to understand for the most part they aren't originally from the UK so they have few qualms about leaving.

In my last role I worked very closely with a trading desk of about 30 traders. Of all of those, I can only think of two that were British in origin. (One was a Scot who had to fly to see his family anyway so was happy to move and left to go abroad for a promotion before the credit crunch.)

Of the rest, a large number were French. They would be more than happy to do the same job in Paris and the bank wouldn't have objected either. Technology means they can. And now France is actually a low tax destination compared to the UK. So I'm pretty certain a lot will head home. Most EU citizens would feel exactly the same way.

"actually yes I would pay more income tax!"

Allegedly the financial sector pays some 14% of the total UK tax (www.cityoflondon.gov.uk/Corporation/media_centre/files2009/FS_tax.htm)

If all of that were lost then tax revenues from every other source would need to rise by 16%.

So 16% more VAT.

16% more fuel duty.

16% more income tax.

16% more NI.

You've seen the trouble that a 1% rise in NI has caused, imagine an across the board 16% rise on every tax.

I'd be interested to know if the total cost of the bailout (i heard a figure like £700 billion?) was more or less than the tax take from the banks since say 1997?

Perhaps overall, the taxpayer is a few quid up (or possibly not)

"The ability of a bank to make money depends on its ability to retain staff who can make the money. And it isn't trivial - a trader who is good at his job can single-handedly make £50m for the company. A good team on a desk can make double that"

Yes I would agree with you but there are some traders (I know this from having met a few and through DH) who put one big bet on and that is how they make their money. If it loses they haven't lost anything except their job and they move to another bank where they try the same thing.

IMO the government should be saying to those banks they have bailed out that the bonus is that they are actually still in a job this year and that should be sufficient. The fact is that without the government they would not be in jobs anyway so it really is a bonus. There is no other industry where a person can earn as much money and they would not find jobs that paid the same kind of money again.

As for the tax on bonus it is a rubbish idea - do away with the bonuses and let them have their choice.

yes happysmiley I totally understand that foreign born bankers will move home. I would in their shoes unless I really really liked it here.
But british born ones (who might be the minority?) won't be IMO , they have family friends ties etc.