UK Unions Attack Banking Bonuses

by Robert Lee, Tax-News.com, London

08 February 2012

The UK government could raise and additional GBP1.7bn (USD2.7bn) a year in tax revenues by preventing companies from deducting excessive bonuses from income for corporate tax purposes, the UK Trades Union Congress (TUC) has said.

According to the TUC, the money raised could provide vital revenues for the government's deficit reduction plan. The TUC holds that the government's staggered lowering of corporate tax to 23% by 2014 effectively cancels out the levy on bank balance sheets. It therefore argues that the banking and finance sector is no longer making a proper contribution towards paying off the deficit.

A previous TUC report showed that banks already pay below the headline rate of corporation tax and estimated that the scale of bank losses at the height of the crash allowed them to reduce future tax bills by GBP19bn.

The TUC's argument is that, with banks now recording large profits and paying out substantial bonuses, they can easily afford a new bonus levy. The TUC believes that making earnings of more than 10 times average annual earnings non-tax deductible, would not only raise revenue, but would also tackle growing pay inequality by encouraging companies to spread pay across the workforce, rather than concentrating it on those at the very top. The average annual salary is GBP26,200 (USD41,428).

TUC General Secretary Brendan Barber said: "Irresponsible banks played the biggest part in causing the crash. But while the rest of us are still paying a heavy price, banks have gone back to business as usual with eye-watering bonuses for their top staff. It is only right that they share these with the rest of us, and making the top bonus pool liable for corporation tax means they would pay a little more towards clearing up the mess they made. We should not forget they have enjoyed a level of state support no other industry could dream of, including an GBP850bn bailout from taxpayers and the Bank of England."

"Scrapping corporation tax relief for earnings over GBP262,000 will help pay off the deficit and tackle the growing pay divide," Barber added.

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