(Adds dropped word in final paragraph)
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Dominic Elliott
LONDON, Jan 14 (Reuters Breakingviews) - Banks will need to
face the consequences if they circumvent changes to UK tax law
by fiddling with bonus payout dates. It’s easy to see why
Goldman Sachs (GS.N) and others are considering delaying the day
they dole out share awards for previous years. Doing so would
enable UK staff to benefit from the reduction in the top rate of
income tax from 50 to 45 percent, due to take effect on April 6.
True, companies have long sought tax boons for staff by
pushing back or advancing payout dates. But tax is a contentious
topic in the UK right now. Amazon (AMZN.O), Google (GOOG.O) and
Starbucks (SBUX.O) have all been hauled in front of politicians
to explain how it is such titans of industry have paid so little
to the exchequer in recent years. A new principle is
establishing itself: companies, and individuals, are expected to
pay the appropriate rate.
Rescheduling payments that were due in the current tax year
isn’t just bad corporate citizenship. It would look too clever
by half. Banks’ reputations would suffer and the brand damage
would probably cost more than paying staff more to compensate
them for the “extra” tax burden arising from paying out on time.
That's because tax is an especially toxic issue for the
banking industry. Even foreign banks that received no direct
state aid are viewed by the public as indirect beneficiaries of
bailout cash. And while banking pay has fallen, it is still
hugely out of kilter with other industries.
Even if banks were not to pay staff an adjustment to offset
the tax, employees shouldn’t grumble. Bankers may be thick
skinned, but they will not want another reason to be shunned in
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Goldman Sachs Group and other banks are considering
delaying payments in the UK for share awards granted in previous
years until after April 6, when the top rate of income tax in
the country will drop to 45 percent from 50 percent, according
to a person familiar with the situation.
- The strategy relates to bonuses that were deferred from
2009, 2010 and 2011. The Financial Times first reported the
news. Goldman recently brought forward payments of deferred
stock to executives in the United States to 2012, in order to
beat tax hikes implemented for top earners in 2013.
- Reuters: Goldman may delay UK bonuses until top tax rate
- For previous columns by the author, Reuters customers can
click on [ELLIOTT/]
(Editing by Chris Hughes and David Evans)
Keywords: BREAKINGVIEWS BRITAIN/BANKS
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