Bank of England Governor Mervyn King said it’s “depressing” that banks may be willing to shift bonus payments to minimize employees’ tax burden.
“I find it a bit depressing that people who earn so much seem to think it’s even more exciting to adjust the timing of it to get the benefit of a lower tax rate,” King told lawmakers in London today. It’s “lacking in care and attention to how others might react. In the long run, financial institutions, like all institutions, depend on the goodwill from society.”
King’s comments followed reports that Goldman Sachs Group Inc. was considering delaying delivery of some bonuses due from prior years for U.K. employees until after the top income-tax rate falls on April 6. Chancellor of the Exchequer George Osborne cut the top rate to 45 percent from 50 percent in his last budget, saying the higher levy generated little revenue.
While Goldman Sachs had considered postponing incentive compensation due to employees from 2009, 2010 and 2011, a person familiar with the matter said today that it won’t delay the distribution of the payouts.
King said that though delaying bonus payments “is clearly not unlawful,” it is “clumsy.”
“This must have an impact on the rest of society, even now it’s the rest of society which is suffering most from the consequences of the financial crisis,” he said.
King has said previously that bank bonuses should be limited if banks didn’t have enough money to build capital.
“It’s only the start of bonus season and already banks are stirring controversy with their disconnect from the rest of society,” said David Hillman, a spokesman for the Robin Hood Tax campaign, a group of charities including Oxfam that want a tax on financial transactions. “It’s time the government got a grip.”