date: 11February 2011
embargo: 00.01hrs Monday 14 February 2011
Pay and bonuses above £250,000 (ten times the level of average pay in the UK) should be considered company profit and liable for corporation tax, the TUC says today (Monday) ahead of the latest round of bank bonus announcements.
With UK banks, including the government-owned Lloyds and RBS, set to announce multi-billion pound bonus pools in the coming weeks, the TUC is calling on the government to reform boardroom bonus culture, ensure the finance sector makes a proper contribution towards paying for the crash it caused and restore its lost reputation as a leader on international banking reform.
The TUC believes that while last year's bonus tax raised significant tax revenues, making big bonuses liable for corporation tax would be a better long-term solution as it would be harder for companies to avoid and can be extended across all company boardrooms.
City bonuses are effectively profit distribution, so classifying and taxing them as profits would force companies to consider whether it's in the interests of its shareholders to pay such high levels of bonuses, says the TUC.
Other policies the TUC wants the government to introduce include:
- disclosure of all pay and bonuses 10 times the level of average pay and for the ratio of directors pay to average employee pay within the company to be included in remuneration reports;
- membership of remuneration committees broadened to include staff representatives;
- ensure that all non-executive director posts are publically advertised and recruited in a transparent manner;
- set targets for reducing the bonus pool and highest bonuses (so that the squeeze is not passed on to frontline banking staff) for banks that the government, and therefore taxpayers, is a majority shareholder in; and,
- end the practice of golden hellos and goodbyes in taxpayer owned banks, and ensure all bonuses are based on long-term performance.
As well as introducing these measures in the UK, the TUC is calling on the government to reassert its authority on the international stage at the upcoming G20 meeting in Paris on 18 and 19 February. In the last few years, the UK has gone from being a leader on international financial reform - as acknowledged by the current business secretary - to a roadblock.
The only significant intervention by the current government so far has been the failed attempt to block EU proposals to toughen the requirement to pay most of any bonuses in equity rather than cash, says the TUC.
TUC General Secretary Brendan Barber said: 'The millions of people faced with job losses and cuts in their living standards are rightly angry that bankers are back lining their pockets as if recession they caused never happened.
'The government cave in on bonuses last week will have only increased public anger.
'But there is no point in blaming individual bankers for their bonuses as they are simply obeying incentives with their system. The way to end banker bashing is to fix the banking system so that it serves the wider needs of the country.
'Making mega bonuses liable for corporation tax could drive reform of our boardroom bonus culture and raise revenues so that the tax burden does not fall so heavily on low and middle income families.
'The finance sector needs reform if we are to avoid another credit bubble. But from corporate tax cuts to opposing international regulatory reform, the current government has matched fighting talk in front of the cameras with pathetic subservience behind closed doors.
'People would happily trade all of the government's tough rhetoric on banks for action that delivers long-term reform.'
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Issued: 14 February, 2011