UK to Tax Bank Bonuses 50%

Any bonus over $40K subject to one-time charge
By Nick McMaster,  Newser Staff
Posted Dec 9, 2009 1:52 PM CST
Britain's Treasury chief Alistair Darling, left, talks with Business Secretary Peter Mandelson, left, during a cabinet meeting at 10 Downing Street, London ahead of a pre-budget report Dec. 9, 2009.   (AP Photo/ Anthony Devlin/PA Wire, Pool)
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(Newser) – Britain will levy a 50% tax on bank bonuses over $40,800 this year, in an attempt to shore up the nation's finances—and appease angry voters—ahead of the coming election. Alistair Darling slammed banks who paid out hefty bonuses even as Britain remains in recession: "Their priority should be to rebuild their financial strength and to increase their lending," the treasury chief said. "If they insist on paying substantial rewards, I am determined to claw money back for the taxpayer."

The bankers will get to keep their bonuses—it's the banks themselves that will have to shell out an extra 50% for every big bonus paid. Critics slammed the plan as populist posturing, noting that the measure would bring in about $890 million—far short of the $178 billion budget shortfall that Britain faces this year. The tax could also discourage investment: "those investing in the UK will have to double guess the actions of future governments," noted one financial executive. With Gordon Brown's government trailing the opposition in polls ahead of an election that must be held by June, the tax proposal was clearly aimed at voters irate over last year's bailout of the banking system.

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