Vir Cantium

I'm right, you know …

Ooh! Look Over There!

It seems to be a fairly reliable rule of thumb that the more countries agree to do something, the less likely it is that such an agreement will actually change anything.

So it’s no surprise that the headlines from the G20 have centred on the latest “action” from the finance ministers to curb bankers’ bonuses (boni?).

This is, or course, to miss the point of yesterday’s declaration. The huffing and puffing over bankers’ pay is just another distraction technique to divert attention from the real issues – the failure of the UK stimulus package, how most other countries are set to emerge from the recession before us, etc, etc. Always easier to burn a few witches rather than get on with actually tackling the plague, eh?

It is a sad reflection that the focus on those evil bankers paying bonuses for the heinous act of making profits for their employers, appeals to the basest human instinct towards envy.

Then there is the effect on the tax take. How? Well, although a few may be playing the residency system, most will have paid tax on those bonuses (or paid tax on one year, rather than spread over longer periods). They would have paid tax at typically 51% (ignoring the effects of pension and personal allowance restrictions). Now, those bonuses, if not paid and retained by the bank, will be taxed with the banks profits at 28%. if circumventing the rules involves converting the bonus into capital, then we’re looking at just 18% tax. All this assumes, as I mentioned, that those bonuses/profits even get taxed in the UK now. Nice one, Darling.

The irony of all this, though, is that the curbs on bonuses are aimed at reducing the short-termism that is blamed for giving rise to the irresponsible borrowing by individuals lending by banks which set up the credit crunch. Whereas, on the other hand, the short termism of trying to reduce the incentives to profitability and success in a major UK industry, and the reductions in tax revenues that will result is somehow visionary and far-sighted?

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One response to “Ooh! Look Over There!

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