Punitive Windfall Tax on UK Bankers Bonuses and other Recent Developments in Executive Remuneration
By Arun Birla, Helena Laughrin, Mark Poerio and Christopher Walter
Alastair Darling, the UK Chancellor (finance minister) announced yesterday in his pre-budget report a one-off "windfall" tax on banks that pay bonuses of over £25,000. The aim of the temporary tax is to address the remuneration practices that contributed to excessive risk taking in the financial services industry, and to use the tax proceeds to fund job support for the young, the old, and the unemployed. The 50% bank payroll tax will affect bonuses paid out by a UK bank (or a foreign bank operating within the UK) to employees engaged in Banking Employment between 12.30pm on 9 December 2009 and 5 April 2010 (although the pre-budget report states that the Government may extend this period). Contractual bonus obligations existing at the time of the Chancellors announcement are exempted, and there is some debate as to whether the investment advisory and asset management arms of banks will be caught.