Bonus supertax to raise up to £3bn as firms pay in full

SENIOR bankers have told City A.M. that the government’s supertax on bank bonuses will not reduce City payouts, predicting the levy will raise up to £3bn as firms cough up to protect their London employees.

That is six times the £550m tax take predicted by chancellor Alistair Darling when introducing the 50 per cent levy on bonuses over £25,000 in his pre-Budget report four weeks ago.

Many banks are now considering following the lead of Goldman Sachs and Lloyds Banking Group in paying out UK bonuses in full, increasing the size of their remuneration pools to compensate for the effects of the tax.

Lloyds’ decision to award bonuses in full will net the Treasury around £100m, while Goldman, if it goes ahead, could pour up to a staggering $1bn (£624m) into public coffers.

Anthony Browne, London Mayor Boris Johnson’s policy director for economic development, said a surprising number of banks had already considered moving teams to other countries because of the tax burden.

“This is not bluster,” he said. “The repeated taxation salami-slicing is chipping away at London’s reputation and is in danger of causing long-term, perhaps permanent, damage.”