Saturday, 21 March 2009

Let them go

Bankers are raging about the 90 percent tax that the US congress are about to impose on bonuses of bailed out companies.

They vented their anger in an article in today's FT, complaining that the measure is "anti American and McCarthyite". The intemperate language didn't stop there. "Finance is one of America’s great industries, and they’re destroying it." Another investment banker claimed that the new tax measures would “send [the US] back to the stone age”.

However, my favourite comment came from Vikram Pandit, the chief executive of the world's largest insolvent bank - Citibank.

"The work we have all done to try to stabilise the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees."

Where will these "talented" people go if Congress implements this tax? London? No chance; there is nothing doing here. Paris? Living under French tax law isn't terribly comfortable. Hong Kong? Now there is an irony, bankers choosing to live under the tender wing of communism.

16 comments:

Anonymous said...

Yes, let them go to hell.

Anonymous said...

Or Singapore. 20% upper rate tax, no CGT etc. Best move i ever made, no exposure to UK economy, no exposure to collapsing GBP or the crash and burn policies of Brown.

Josh said...

Bonuses odious that they may be, paid to bankers are a red herring to divert outrage to where it should be.
The wasted Trillions paid out of taxpayer money to the banking systems in the US and UK in particular the vast sums paid to AIG to rescue Goldman Sachs and other major investment banks from their past imprudence.

Mitch said...

"talented" people like that we can do without. offer them a choice,take the bonus and never work in the industry again or keep your job and hand the bonus back.

Anonymous said...

Pandit: ".. if we lose our talented people because Congress imposes a special tax on financial services employees."

To paraphrase Dan Akroyd, Bill Murray et al.

Vikram, where they going to go?

Where exactly are these talented people going to go?

What other industry pays similar salaries to the banksters?

The financial services industry is in the same predictament as the automotive industry just now. Far too much 'product' not enough customers.

Anonymous said...

i agree its a diversion. watch the magicians other hand. plus its an abuse of power, unconstutional and bad form. legislation like this endangers everyones right.

I would let them keep their bonuses. I would just put the companies into receivership and cut their saleries down to serf level with the rest of us. they do deserve to sit on it and spin

http://market-ticker.denninger.net/archives/887-Brad-Sherman-HE-GETS-IT!.html

Anonymous said...

Let them go!!!! Absolutely!!!! We need genuinely clever AND principled bankers, not the kind who cynically rode a bubble for all it was worth, and had insifficient sense, or honesty, to get off the merry-go-round.

Couldn't we create a new 'caste' - ex-bankers who clean the smallest rooms? Surely they know what they should do with a loo-brush!

B. in C.

sobers said...

It comes down to rule of law, or anarchy. If you want to make everyones contract of employment nul & void the respective govts either side of the Atlantic should have put the banks (and AIG etc) into receivership, bought them from the receiver for a £ (or $), giving all the employees new contracts with no bonuses (which they would happily have signed just to have a job).

If you just put in capital, or provide loans, without forcing the bank into receivership first, you can't avoid the existing legal obligations to pay bonuses. To then tax those bonuses specifically, while not taxing other people in identical situations, is in my view immoral. Its just a way to hide the fact that the govts don't have a clue what they're doing.

I believe the bonus tax affects only employees of the propped up banks. Surely it is not legal to discrimninate between people like that. Either all bonuses should be taxed at 90% or none.

Anonymous said...

Harumph (to my I hope good friend Mr. Sobers, with whom I usually agree on all points). Moral realism is the order of the day, I think! I mean, if windfall taxes are possible and legal, why not undeserved bonus taxes? A windfall is an unearned, exceptional profit - sounds just like these dubious bonuses and pensions to me. Sometimes contracts encounter unforeseen obstacles. If the government imposes the obstacle, so what if it is also the owner? On both counts it has a right to act. Moreover these people are bankers, much given to tax avoidance, we hear, morally little different to tax evasion. B. in C.

Anonymous said...

sobers, it is all about playing to the crowd and about scapegoating. You don't honestly think this is an issue that if it wasn't so heavily politicised would be taking up so much time? Why discuss the 600bn odd that Obama wants to spend when you can focus on 165m? Why discuss whether putting out 400bn odd of UK cash to "get banks lending again" is a good call when you can argue about a 20 million pound pension.

Anonymous said...

Anon @17:41, a "windfall" is exactly not that. It is a random smash and grab on a politically unpopular target to cover up a government's inability to come up with the cash legitimately and/or to smother bad news.

Oh and tax avoidance is not "morally little different" to tax evasion, rather it is morally equivalent to not overpaying a restaurant bill or demanding that computer you bought for 500GBP should really be 1000GBP. Also note the company carrying the banner against "tax avoidance" is a big avoider itself - left-wingers being hypocrites who would have thunk it...

I assume you would also send to prison everyone with a pension and or PEP and ISA. After all that is no different.

sobers said...

@Anon 18:11 - Excellent point on pensions/ISAs and tax avoidance. Deserves a wider audience.

Once the rule of law is abandoned, we are in a moral maze of unimaginable proportions. Are we to have some Harriet Harman inspired 'Court of Public Opinion' to which we must apply to get approval of our tax affairs? David Beckham presumably will pay virtually zero tax, while Noel Edmonds will pay through the nose. What an edifying state of affairs for a country with a centuries old tradition of the rule of law.

Anonymous said...

i find it telling that the only thing the congress can galvinize on is immoral and illegal. Where are they when we do need them to listen to us? Maybe we are just rotten and controlled to teh core and there is no escape.

Anonymous said...

the crucial word here from Vikram's statement is 'talented people'.
If these individuals are so important to stabilise the financial system, what exactly positions did they hold and actions did they take , when the same financial system was being undermined by the companies that they are now being credited in saving them

Anonymous said...

China aren't actually communist. SUre, it's run by the communist party, but it's basically a light form of totalitarianism. They have a lot of capitalism there (obviously not as much as us though).

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