Tens of thousands of UK-based bankers are expected to be caught up in the 50% tax the UK government yesterday imposed on bank bonus pools.
The measure, which comes into force today and runs off on 5th April 2010, subjects banks paying UK bonuses over £25,000 ($40,700) to a one-off 50% levy.
Here's what the smart (or not so smart) money is saying:
'There is no bank which has not benefited, either directly or indirectly, from (government) help. This should be a time for banks to rebuild their capital base and become stronger.
However. there are some banks who still believe their priority is to pay substantial bonuses to their already high-paid staff. So, I am giving them a choice. They can use their profits to build up their capital base, but if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer'.
UK Chancellor Alistair Darling (BBC)
'I think banking has become a truly parasitical business. Bankers these days borrow money at 30 basis points, and lend it to the government at 300 basis points. Then they go play golf'.
Andrew Hilton, CSFI, a research group for the financial services industry (The New York Times)
'The Treasury will face some major practical issues in framing this law. Defining a bonus will need a lot of care; so will defining banks - or is this a measure that could impact all businesses. That may be necessary to manage possible challenges under human rights or anti-discrimination laws. As with all tax changes, there is a risk of unintended consequences'.
John Whiting, Director, Chartered Institute of Taxation (The Daily Telegraph)
'This is one of the most easily dodged taxes in years. Almost all banks will be able to put off formal agreements on bonuses until after April. The ease with which this tax can be ducked raises questions of whether this is a political move to appease voters, rather than a genuine attempt to raise money'.
Roy Maugham, Tax Partner, UHY Hacker Young (The Times)
'It's something that the banks are probably going to have to pay up on this year, and hope it doesn't happen again. This is not really a tax on individual bankers, so the government is a lot less open to legal challenges than it could have been'.
Daniel Naftalin, Partner, Mishcon de Reya (Bloomberg)
'Instead of telling the country that we are all in it together, Labour now pretends they can solve our problems by setting one part of the country against another'.
Shadow Chancellor George Osborne (Reuters)
'It's a poison pill. Either shareholders are going to take home less, or banks are going to punish their employees who have done very well'.
Jo Keddie, Employment Lawyer, Dawsons (Bloomberg)
'It is completely naive to think this will have no effect. The Treasury, the FSA, the Inland Revenue and politicians are all being very aggressive across the board. The UK is making itself business unfriendly. A huge number of colleagues will get themselves relocated'.
Unnamed banker (The Financial Times)