British Prime Minister Gordon Brown and French President Nicolas Sarkozy have issued a joint call for bankers to pay a special tax on any bonus they have received this year.
The two leaders say this is a fair way to repay taxpayers some of the money they have spent in supporting the banks through the financial crisis.
Brown and Sarkozy say they want global agreement to ensure that top bankers pay back more of their 2009 bonuses to the taxpayer.
In a joint article appearing in today's "Wall Street Journal," the British and French leaders call for the imposition of a special one-time tax on bonuses.
They say it's "not acceptable" for the taxpayer to "foot the bill" for bailing out banks during the financial crisis, while bank staff are now enjoying all the gains as the economy recovers.
In their article, Brown and Sarkozy do not state the rate of tax they envisage.
But the article appears just a day after the British government unilaterally announced a one-off tax of 50 percent on bankers' bonuses above $40,700.
The government said the tax is meant to recoup some of the money spent shoring up the banking sector during the crisis. It's estimated that banks operating in the United Kingdom plan to pay about $8.5 billion in bonuses this year.
The government says the tax will raise about $700 million for the deficit-laden U.K. budget.
Such a move would be politically popular in France as well as Britain, where many ordinary people blame the banks for the economic crash which has seen credit disappear and unemployment rise spectacularly.
"The bonus question has always been the most politically charged of all the issues which have arisen from the financial crisis. It's not hard to see why," Philip Whyte, economics expert and Senior Research Fellow at the Centre for European Reform in London, tells RFE/RL. "The fundamental problem is that people who work in the financial sector are highly rewarded but they had to be bailed out with taxpayers' money. So it's not hard to see why this has become such a politically charged question."
Brown and Sarkozy are calling for a global agreement on the supertax, saying the crisis has shown how globalized the economy is and therefore any regulation must also be on the global level, to ensure that the financial sector operates on a level playing field.
By these comments, the two leaders are expressing their concern that bankers in the City of London and in Paris might move their business elsewhere to lower tax areas if they find themselves heavily taxed at home.
Press reports say some London bankers have already asked about temporary transfer to offices outside Britain to avoid the tax.
But Whyte says taxation is not the only way to tackle the problem of perceived excessive rewards for the finance sector. He refers to the work done by the "G20" group of developed and developing nations.
"The G20 has put together some principles on bonus payments and a lot of countries are actually introducing national policies to influence the way that bankers are paid," Whyte says. "There is this sense that there's nothing much you can do about banks that pay bonuses to their staff, but actually the financial regulators do have an instrument at their disposal and that is to penalize banks which they think are taking excessive risks through the way they incentivize their staff, and hit them with higher capital requirements, so you don’t' necessarily need to hit them through the tax system."
"The Wall Street Journal" also carries an article today that says the official at the U.S. Treasury department in charge of regulating pay in the financial sector, Kenneth Feinberg, is about to enact limits to pay for employees at companies in the United States that received large amounts of money in government handouts.
The article says that Feinberg will impose a $500,000 cap on the salaries of hundreds of employees at such companies. He has already capped incomes for top-level employees.
compiled from agency reports
The two leaders say this is a fair way to repay taxpayers some of the money they have spent in supporting the banks through the financial crisis.
Brown and Sarkozy say they want global agreement to ensure that top bankers pay back more of their 2009 bonuses to the taxpayer.
In a joint article appearing in today's "Wall Street Journal," the British and French leaders call for the imposition of a special one-time tax on bonuses.
They say it's "not acceptable" for the taxpayer to "foot the bill" for bailing out banks during the financial crisis, while bank staff are now enjoying all the gains as the economy recovers.
In their article, Brown and Sarkozy do not state the rate of tax they envisage.
But the article appears just a day after the British government unilaterally announced a one-off tax of 50 percent on bankers' bonuses above $40,700.
The government said the tax is meant to recoup some of the money spent shoring up the banking sector during the crisis. It's estimated that banks operating in the United Kingdom plan to pay about $8.5 billion in bonuses this year.
The government says the tax will raise about $700 million for the deficit-laden U.K. budget.
Such a move would be politically popular in France as well as Britain, where many ordinary people blame the banks for the economic crash which has seen credit disappear and unemployment rise spectacularly.
"The bonus question has always been the most politically charged of all the issues which have arisen from the financial crisis. It's not hard to see why," Philip Whyte, economics expert and Senior Research Fellow at the Centre for European Reform in London, tells RFE/RL. "The fundamental problem is that people who work in the financial sector are highly rewarded but they had to be bailed out with taxpayers' money. So it's not hard to see why this has become such a politically charged question."
Brown and Sarkozy are calling for a global agreement on the supertax, saying the crisis has shown how globalized the economy is and therefore any regulation must also be on the global level, to ensure that the financial sector operates on a level playing field.
By these comments, the two leaders are expressing their concern that bankers in the City of London and in Paris might move their business elsewhere to lower tax areas if they find themselves heavily taxed at home.
Press reports say some London bankers have already asked about temporary transfer to offices outside Britain to avoid the tax.
But Whyte says taxation is not the only way to tackle the problem of perceived excessive rewards for the finance sector. He refers to the work done by the "G20" group of developed and developing nations.
"The G20 has put together some principles on bonus payments and a lot of countries are actually introducing national policies to influence the way that bankers are paid," Whyte says. "There is this sense that there's nothing much you can do about banks that pay bonuses to their staff, but actually the financial regulators do have an instrument at their disposal and that is to penalize banks which they think are taking excessive risks through the way they incentivize their staff, and hit them with higher capital requirements, so you don’t' necessarily need to hit them through the tax system."
"The Wall Street Journal" also carries an article today that says the official at the U.S. Treasury department in charge of regulating pay in the financial sector, Kenneth Feinberg, is about to enact limits to pay for employees at companies in the United States that received large amounts of money in government handouts.
The article says that Feinberg will impose a $500,000 cap on the salaries of hundreds of employees at such companies. He has already capped incomes for top-level employees.
compiled from agency reports