Heads I win, tails you lose. This time the public sector played that game against banks - instead of the other way around. Guess who won.
That's the takeaway from a Financial Times story Wednesday about the outcome of the dreaded UK tax on bank bonus payments.
Most institutions, it seems, are going ahead with plans to pay their employees cash bonuses. They'll absorb the one-time 50 percent "supertax" announced a month ago by Chancellor of the Exchequer Alistair Darling - which resembles a payroll tax levied against the employer, not the recipient.
As a result, the UK Treasury is "is set for a windfall of hundreds of millions of pounds just months before the election," the FT observes. Nevertheless, the paper's headline reads: "UK Treasury to cash in as bonus tax fails." That's the FT's way of acknowledging the tax's inspiration was more political than economic. Like various soak-the-bankers proposals in the U.S., it aimed to shame bank managements into paying their employees less. Politicians figure that would help gratify the envy and resentment felt by the mass of voters who earn far less than many financial professionals do.
UK Treasury insiders told the FT the levy on all bonuses of more than 25,000 is now expected to raise at least 1 billion, net. That's "nearly double the government's initial estimate, and perhaps considerably more," the paper reports. Meanwhile, some bankers predict the government will gross at least four times that amount.
UK Treasury to cash in as bonus tax fails [FT]
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