Pre-Budget Report 2009 - An expensive day for banks
Commenting on Alistair Darling's announcement of a 50% one-off levy for banker bonuses over £25,000, Jill Storey, People Services Tax Partner at KPMG LLP.
Wednesday, 9 December 2009
Commenting on Alistair Darling's announcement of a 50% one-off levy for banker bonuses over £25,000, Jill Storey, People Services Tax Partner at KPMG LLP said:
"Even before today's pre-budget report introduced the bank payroll tax, we were taking calls from highly skilled individuals looking to move to other financial centres such as Zurich, Singapore and Frankfurt. While tax is only one of the reasons individuals and companies may consider relocation, it is clearly a key driver particularly when the top rate of marginal income in Singapore is 20%.
"While the Chancellor specifically said he was not introducing a 'windfall tax' during his pre-budget report, in many ways we can liken this one-off levy to the 1981 windfall tax on banks or 1997 windfall tax on utilities.
"Today, the £0.5 billion the Chancellor expects to generate from this initiative represents less than 1% of overall estimated total tax take for 2009/10. In addition, yesterday it cost a bank £112,800 to provide a banker with £59,000 of net take home pay, but, today, after the first £25,000 of bonus, it costs £162,800. Because of London's importance as a global financial center, it is critical that these changes are subjected to proper consultation and debate.
"The major question of how the banks will handle the levy remains to be answered. Essentially, will the banks reduce bonuses to cover the impact of the levy or will they look at other measures to preserve their employees' interests?
Ends
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About KPMG: KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff. The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.