Chancellor of the Exchequer Alistair Darling has announced that bankers’ bonuses amounting to more than £25,000 will be subject to a one-off 50% tax.
The measure outlined in today’s pre-Budget report is designed to ensure banks can use their profits to build up their capital base.
Darling, who decided against introducing the widely debated windfall tax, said that the employer and not the employee would pay the one-off levy. All bonuses of more than £25,000 to be rewarded by a bank will be pooled and taxed altogether. The move could raise £550m, which would be used to help reduce unemployment.
The Chancellor said: “The banks last year made collective losses of £80billion in this country alone. This would have been much higher without the unprecedented level of support from the taxpayer. There is no bank, which has not benefited, either directly or indirectly, from this help. This should be a time for banks to rebuild their capital base and become stronger. A tax on profits, as has been suggested, will prevent them from doing this.So I have decided against a windfall tax.
“However, there are some banks who still believe their priority is to pay substantial bonuses to their already high-paid staff. Their priority should be to rebuild their financial strength and increase their lending. So I am giving them a choice. They can use their profits to build up their capital base. But if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer.”
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