Christmas Bonuses for all?
The Financial Services Authority is attempting to control the size of bonuses in City banks. Any bonus over £25,000.00 will be taxed at 50%. But it is the bank issuing the bonus and not the individuals receiving the bonus who will be taxed.
This is a clever way of allowing banks to pay bonuses of any size to reward individuals, but getting the tax revenue from only one source, viz. the bank. Further, the taxes the bank pays, together with the large bonuses, will reduce their basic financial reserves. This may have an influence on the size of the total cost of all the bonuses the bank wishes to pay out.
Bonuses beneath £25,000.00 will not be taxed. More could be made of this decision. Why not advertise this as an opportunity for all employers to reward their employees? Bonuses currently have such a negative press that people on more modest incomes may not get a bonus simply because of the current public anger at the banks. Indeed “Christmas boxes” were an older tradition of giving to postmen and dustbin men.
This raises the question of what exactly is a bonus? Is something that is paid only once and at Christmas; or can it be paid in 12 monthly instalments? This unclarity will create more work for Lawyers.
More fundamentally, the current efforts of the FSA to get the banks to reveal the size of their bonus payments will permit the FSA to assess the size of the tax bill. The attempt to reduce the size of bonuses can be seen as managing banks, especially as so much taxpayers money has been given to banks. It can appear that tax payers money is, in part at least, being given to wealthy individual bankers, and so delaying or jeopardising the repayment to the Treasury.
Is this creeping nationalisation, or socialism by stealth? In any case, many employees face redundancy over Christmas, not bonuses. This includes British Airways and British Telecom.