Tags: EU | Britain | Bank | Bonuses

London Mayor Warns Tax to Fuel Banker Exodus

Friday, 15 Jan 2010 11:58 AM

London Mayor Boris Johnson has warned that thousands of high earning bankers will flee London because of the government's tougher taxes on bonuses.

In a letter to Treasury chief Alistair Darling released on Friday, Johnson seeks an urgent meeting to discuss the introduction of new tax rates for top earners and a temporary 50 percent levy on bank bonuses above 25,000 pounds ($40,700).

"You have made unilateral changes to taxation that risk damaging London's competitiveness and its status, alongside New York, as the world's leading financial-services center," Johnson wrote in the letter.

He estimated that around 9,000 bankers may relocate abroad, with knock-on effects on London's legal, accountancy, publishing and media industries and a reduction in the tax resources available to fund public services.

"The government is doing nothing more than fast-tracking the departure of this talent pool out of Britain and into the welcoming arms of our competitors," he added.

However, some lawmakers and analysts said Johnson's warning was undermined by plans announced by U.S. President Barack Obama on Thursday to tax U.S. banks to recoup the public bailout of foundering firms at the height of the financial crisis.

Obama is proposing a tax of 0.15 percent on the liabilities of large financial institutions. It would apply only to those companies with assets of more than $50 billion — a group estimated at about 50.

Amid calls for British Prime Minister Gordon Brown to impose similar levies on British banks, John Mann, a member of the ruling Labour Party, said the new U.S. tax had "delegitimized" claims bankers will flee abroad to avoid levies in Britain.

"I think it is an excellent plan and it opens up the possibility for the rest of the world — including this country — to do something similar," said Mann, who sits on the influential cross-party Commons Treasury Committee.

"Bankers can't now use the excuse that they will go abroad, because if America is doing it — and that's where most of the big investment banks are — then there is nowhere else to go," he added.

Brendan Barber, the general secretary of the Trades Union Congress, said that Johnson was suggesting that senior bankers should have a "veto on any policy they do not like."

"All they need to do is threaten to leave, and Boris would have us cave in," Barber said. "But they have cried wolf too often. And as the U.S. shows, every advanced country is now starting to demand that banks and bankers pay their fair share of putting right the damage of the recession they have caused."

Brown's spokesman Simon Lewis said that the Treasury was studying Obama's proposals, but stressed that individual countries' responses would depend on their particular circumstances.

"The interventions made by the UK and US governments were very different," Lewis said.

Britain took stakes in the banks it bailed out, forking out some 850 billion pounds in taxpayer money, substantially more than the $100 billion cost of U.S. intervention.

Britain could potentially make a profit if it sells those stakes at the right time, likely some time off yet.

"We took stakes in banks and we therefore expect to recoup that investment, as the prime minister has made clear, by realising our investment at the right moment," said Lewis.

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London Mayor Boris Johnson has warned that thousands of high earning bankers will flee London because of the government's tougher taxes on bonuses.In a letter to Treasury chief Alistair Darling released on Friday, Johnson seeks an urgent meeting to discuss the introduction...
EU,Britain,Bank,Bonuses
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2010-58-15
 

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