Bailout

Britain?s very modest surtax revenues

By Felix Salmon

Andrew Clavell notes something very interesting about the amount of money the UK Treasury expects to raise from its bonus tax:

Given £6bn of bonuses originally expected to be paid to UK based bank employees, HM Treasury’s anticipation of proceeds from the 50% levy of only £550m says a lot about what the government supposes the banks’ reactions will be.

No, the reaction isn’t that they’ll suddenly decide to slash bonuses from £6 billion to £1.1 billion. Instead, they’ll find loopholes: most likely just deferring the payment of bonuses until after the supertax expires. At that point, the top tax bracket rises to 50% from 40%, so the government will still get a bit more money. But not nearly as much as the headline rate on the supertax implies.

Even so, the £550 million estimate does seem incredibly small: it implies total bonus pools this bonus season of just £1.1 billion. Can that really be the case?

Full post as published by Macroprudential on December 10, 2009 (boomark / email).