BANKS BRACED FOR 1BN WINDFALL TAX
CHANCELLOR Alistair Darling was this weekend mulling a £1bn windfall tax on the banks as part of a “class war” strategy to depict the Tories as a party for the “rich”.
The windfall tax, versions of which were still being worked on by officials last night, is likely to be for a year only and will be billed as discouraging “excessive bonuses”. It is set to form the centrepiece of Wednesday’s pre-Budget report, which will also include other tax hikes on the better-off and the City.
The windfall tax is likely to hit all UK-owned banks, including those such as Barclays and HSBC that have not received money from the taxpayer, as well as foreign firms such as Deutsche Bank, Credit Suisse, Bank of America and Goldman Sachs. The news will fuel growing fears that Britain is ceasing to be an attractive location for the financial services industry.
Darling said: “Bonuses have to be reasonable and they have to be responsible. We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what’s going on.” Darling said the better-off would have to carry the costs for bringing the country out of recession.
“I think people will understand that as we come through a difficult period like this that we would expect the broadest shoulders to bear the greatest burden,” he told the BBC.
Other policies may include a hike in the tax on capital gains to bring it in line with income tax, and cutting higher rate tax relief on pension contributions. The planned increase in the inheritance tax threshold is set to be scrapped. Darling will stick to the 50p higher rate tax band on earnings of more than £150,000 due to come in next April. “It wouldn’t be right to be giving further tax breaks to people at the very top,” Darling said.
Shadow chancellor George Osborne also refused to rule out a windfall tax on bonuses. But he said he would prefer reforms to ensure banks pay tax on future profits. “When the banks start making profits again they should start paying taxes again,” he said.