Chancellor considers windfall tax on City bonuses

by Gill Montia

Story link: Chancellor considers windfall tax on City bonuses

The Chancellor of the Exchequer may impose a windfall tax on bankers whose bonuses exceed a certain level.

According to reports, Alistair Darling is considering a one-off levy, details of which could be announced in his pre-budget report on Wednesday.

Public outrage over bank bonuses has been heightened by last week’s revelation from the National Audit Office that taxpayer liabilities for UK banks amount to around £850 billion, and banks may yet face an annual levy that could be used to offset any future bail-outs.

Last week, Royal Bank of Scotland (RBS) directors threatened to resign when the Chancellor demanded a review of plans to pay bonuses totalling £1.5 billion to the group’s investment banking staff.

According to its legal advisors, the Board of the majority state-owned bank is duty bound to ensure the business is run profitably in the interests of all shareholders.

With RBS’s investment banking division on track to post profit of £6 billion in 2009, the directors argue that £1.5 billion in bonuses is needed to ensure that the best performing staff are retained.

However, the Treasury has claimed the right to intervene in the matter, in the interest of the taxpayers who have bailed out the bank.