Sensible tax planning or brazen gaming of the system ? Most big banks in London, when wondering whether to defer the new year dishing-out of bonuses until the top rate of tax falls from 50p to 45p in April, concluded that the debate wasn't worth having.
Enabling the recipient of a £200,000 bonus to keep an extra £10,000 might be popular internally but re-jigging payment dates would look terrible externally. We won't go there, most decided, concluding that another round of headlines about a self-interested financial elite milking the last drop of their substantial rewards was not the image they were looking to project in the new era of socially conscious banking.
Goldman Sachs, though, is different. Chief executive Lloyd Blankfein himself blazed the trail in the US a few weeks ago. He and a few senior colleagues were the beneficiaries of a fleet-footed manoeuvre over the new year – share-based bonuses, due to be handed out in January, were dispatched on December 31 to dodge a fiscal cliff-related rise in tax rates as the year turned.
Goldman's London staff, one can speculate, pointed out that what's good for the goose is good for the gander. In a supposedly all-in-this-together firm – "we stress teamwork in everything we do", says Goldman's eighth principle of doing business – this argument probably had some force. Thus the bank may go out on a limb and pay bonuses after 6 April.
All bonuses in banking are (in theory) discretionary, so one assumes the treatment would be legal. But the government, if it chose, could stop the nonsense at a stroke. A one-sentence admonishment from the chancellor ought to do the trick. If it doesn't, try reminding Goldman that the UK government has said, more or less, that it won't give contracts to aggressive tax-avoiders in future.
In case you missed it, here's paragraph 2.105 of last month's autumn statement: "The Cabinet Office and HMRC will consult on the use of the procurement process to deter tax avoidance and evasion and the proposed definition of key concepts, with a view to the new arrangements coming into effect from 1 April 2013."
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