Shadow Treasury minister calls on chancellor and prime minister to prevent bankers benefiting from cut to top income tax rate
A political row has erupted over attempts by banks – led by Goldman Sachs – to defer bonus payments to enable highly paid bankers to benefit from the cut to income tax on 6 April.
While the government insisted it could not comment on the “tax affairs of individual companies”, Labour used the escalating row to call on the government to scrap the cut to the top rate. The rate was raised to 50% in 2010 but will fall to 45% at the start of the new tax year.
Goldman Sachs also faced condemnation. “They’re so greedy they know no shame,” said Lord Oakeshott, a former Liberal Democrat Treasury spokesman in the Lords.
Chris Leslie, shadow Treasury minister, said that while banks needed to consider the reputational risk of delaying their bonuses to the new tax year, it was up to the chancellor and prime minister to stop such efforts to benefit top-rate taxpayers.
“Banks need to think carefully about their own reputations if they seek to avoid tax in this way, but the ultimate responsibility lies with David Cameron and George Osborne,” said Leslie.
“They have refused to repeat Labour’s bank bonus tax and pre-announced a £3bn income tax cut for the richest people in the country, giving them the opportunity to delay income and bonuses until April. It cannot be right that this out of touch government is making millions of working people and pensioners on modest incomes pay more while giving millionaires and bankers a huge tax cut.”
Oakeshott added it was a “real test for Cameron and Osborne” and referred to remarks in June by the prime minister when he described tax avoidance used by comedian Jimmy Carr as “morally wrong”.
“Will it be selective indignation all over again, criticising Starbucks but not Goldman? Osborne excoriated aggressive tax avoidance in the budget – he should now name and shame Goldman and confirm that this behaviour would disqualify them from government contracts,” Oakeshott said.
Goldman, which publishes its full-year results on Wednesday, is considering whether to push deferred bonuses from 2009, 2010 and 2011, which were scheduled to be handed to staff by the end of March, into the new tax year. Bonuses for 2012, which will be given to staff shortly, are not included in the plan currently being considered.
A Treasury spokesman said: “We do not comment on the tax affairs of individual companies, but we are clear that everyone must pay the tax they owe.”
If the Wall Street firm presses ahead with the idea it would be matching the steps it took to enable its US-based staff to avoid a tax hike at the start of the year when it paid out about £40m in so-called restricted stock just as the “fiscal cliff” budget talks led to taxes being raised.
City sources believe a number of banks considered whether to delay bonuses into the new tax year but that many have rejected the idea to avoid negative publicity in the wake of the row surrounding corporation tax paid by Starbucks in the UK. Some bankers will benefit from the income tax cut as their bonuses for 2012 are not paid until June. This includes employees at bailed-out banks Lloyds Banking Group and Royal Bank of Scotland, who receive any bonus above £2,000 in shares in June at the earliest.
Other big City players such as Credit Suisse, HSBC, JP Morgan and UBS are not making changes to the way they hand out their bonuses.
The Unite union described banks as “real shirkers”.
Unite’s Len McCluskey said: “This is clear proof that the City has learned nothing. Any decent government would condemn this behaviour as a blatant case of tax avoidance and demand action.”
Campaigners at the Robin Hood Tax campaign, who want a new tax on the financial sector, also urged the government to act. “The government should not stand idly by but must act to ensure the richest sector in the UK pays its fair share to save services and create jobs,” a spokesman for the campaign said. “Goldman Sachs’s latest tax trick is lamentably true to form – fleecing the public purse to stuff the pockets of its bankers.”