I wrote in the last issue of MoneyWeek magazine about a super tax on bank bonuses (if you’re not already a subscriber, subscribe to MoneyWeek magazine). Won’t work, I said. Too complicated and bound to be far too easy for clever bankers (and say what you like, they are mostly clever) to get around.
Clearly, Mr Darling didn’t agree. His PBR speech introduced a supertax on all bonuses over £25,000 with the twist being that the money is to be paid not by the bankers but by the banks.
However, already the whole thing looks a little bit ridiculous. Why? Because it is too easy to get around.
What leaps out, says Tony Bernstein of HW Fisher & Company chartered accountants, is that “an exception has been made for guaranteed bonuses.” That means that the tax won’t apply to a great many of the very top earners (guaranteed bonuses might sound like an oxymoron to non City folk but inside the City they are pretty standard) at all.
But even more ridiculous, the tax will apparently only apply until 5 April 2010 which means that the banks can get around it by the very simple expedient of delaying paying bonuses until after then – which quite a few of them do already anyway.
There has been much talk in the last few days about how windfall taxes such as this will drive our bankers away. That wouldn’t necessarily be a good thing (note that a UK resident earning £1m pays the same amount of income tax as 95 people making £20,000) but based on today’s performance from Darling I don’t think we have to worry about it too much.
Who’s going to bother upping sticks from Notting Hill to Monaco when it is clear that, regardless of what Mr Darling and Mr Brown might tell their electorate, most bankers won’t be paying a penny more in tax this year than they did last year.