Perhaps London’s investment bankers are wishing they’d chosen a career in corporate law instead. Alistair Darling looks set to come down heavily on banker bonuses in his pre-budget speech today, with commentators predicting a super tax on bonuses in excess of the impending 50% income tax for high earners. Put simply, this means that a law firm partner on, say, £1m a year will be in a better tax position than an investment banker on a £200,000 salary with an £800,000 bonus.
It doesn’t seem like there’s any love lost between lawyers and bankers – according to reports, one unnamed City law firm advised the Treasury on how to implement a bonus tax that couldn’t be avoided by the bankers. But unfortunately, if another tactical leak to the newspapers is correct, government advisory work is in for a bit of a squeeze: Gordon Brown apparently wants to cut spending on consultants by 50%. By doing this, in tandem with a 25% cut on government marketing and communications, he expects to save £650m.
More worrying for the City’s legal elite are unconfirmed reports that there will be an extra rung added on top of the new 50% top-earner income tax rate. Predictions of a 60% to 70% tax on earnings above £500,000 have been sounded in some parts of the media.
All of this could be moot – Darling, predictably, has not pre-empted his speech by commenting on the reports, but he did have this to say: ‘You would expect the broadest shoulders to bear the greatest burden.’ Broad shoulders indeed, but hopefully not broad shoulders that have already booked their flights to pastures new.
No comments yet