The Treasury's forecast that a one-off bonus super-tax would raise £550 million may be a significant underestimate, with bankers suggesting the government could receive many times that amount. According to sources, just two international banks, Goldman Sachs and JP Morgan, could each pay more than £550 million under the 50% tax on bonuses exceeding £25,000.
The tax, payable by banks as a payroll tax, is expected to apply to bonuses for UK-based employees. Goldman and JP Morgan are projected to declare bonuses worth $2 billion each for their UK staff, with most exceeding the threshold, leading to tax payments of around $1 billion each. Other international banks like Bank of America, Credit Suisse, Morgan Stanley, and Deutsche Bank are expected to pay about 25% less, while British banks Barclays and Royal Bank of Scotland could also contribute substantial sums.
Treasury official Edward Troup told MPs in December that the gross take from the tax would be around £1 billion, describing the £550 million figure as a net estimate after accounting for potential reductions in bonus payments. However, City cynics view the discrepancy as political opportunism, allowing ministers to announce good news on tax revenue from unpopular bankers in the budget.
Bankers' anger over the tax continues to rise, with many vowing to remember the levy when making future decisions about office locations. Most big banks are expected to protect UK-based employees by treating the tax as a firm-wide cost, reducing bonuses globally by 5% to 12%, or passing costs to shareholders through lower dividends.
