GOLDMAN Sachs will pay its bankers’ bonuses before the 50p tax rate is cut to 45p, it emerged yesterday, after an outcry from politicians and regulators angry at plans to delay the payments into the new tax year.
The bank’s compensation board considered shifting the payments to April, a source familiar with the discussions told City A.M., but decided to stick with a more usual timetable to avoid damaging the investment bank’s image.
Bank of England governor Sir Mervyn King had earlier expressed his worries about the idea of delaying the payments.
“I find it a bit depressing that people who earn so much seem to think it is even more exciting to adjust the timing to benefit from a lower tax rate, knowing it must have an impact on the rest of society,” he said in a hearing with MPs yesterday.
“Even now the rest of society is suffering the most from the effects on the financial crisis. In the long run financial institutions depend on goodwill in the rest of society.”
Labour leaders had attacked the proposal, with Chris Leslie MP arguing “banks need to think carefully about their own reputations if they seek to avoid tax in this way”.
And Treasury minister Sajid Javid contacted senior figures at the bank to express concern at the plans.
But although bankers will pay the higher rate, many self-employed high-earners are likely to avoid the 50p charge by shifting their payments into April.
The latest figures from HMRC show 52,000 self-employed workers earned above £150,000 in the tax year 2010-11, with incomes totalling £17.33bn.
If they earned the same amount this year they could log a 2012-13 income of £150,000 each before April, and the remaining £9.53bn in the next tax year, avoiding the 50p top rate.
By paying 45p instead of 50p in the pound, they would save almost £500m in tax payments.
Goldman Sachs declined to comment on the developments.