Here’s a great idea for financial challenged Governments around the globe; tax bank profits
Reports the Greek and British Governments are eyeing special taxes on the bank profits to help boost income and reduce debt bills.
In terms of their debts, the taxes won’t sold the problem of Greece or the UK, nor reduce funding gaps. But the idea will give quite a few people in both countries (and others where the banks have been saved, but appear arrogant), a great deal of pleasure.
But the idea isn’t the best piece of policy around. The UK still depends quite heavily on financial services to generate taxes and employment, even at these near recession levels.
But the fact that the UK in particular is looking at the idea tells us just how badly the banks have managed their bailouts by taxpayers and the surging market recovery.
Reports of the return of big bonuses, signing on payments, huge salaries and exit payments have done nothing to lessen the contempt many feel towards a group of companies that a year ago were staggering on the edge of collapse, and threatening to drag their economies down with them.
The head of Bank of England has already said in public that two banks, RBS and HBOS, came within hours of collapsing a year ago, something that was only prevented by huge cash injections and bailouts from the UK Government.
Now the banks complain about new controls, added laws and restrictions on pay to prevent those huge financial groups from threatening the rest of the economy again.
And it’s a similar situation in Spain, Italy, parts of France and Germany, Ireland and in Greece.
There’s no sign of a tax push in the US, but a senior member of the Obama administration unloaded on Wall Street on a Sunday chat show.
"The bonuses are offensive," David Axelrod, a senior adviser to President Obama, was quoted by Reuters as saying said on the ABC News program, "This Week."
"The most offensive thing is, we haven’t seen the kind of increase in lending that … we should," Axelrod said. "There are a lot of small businesses, credit-worthy businesses around this country who still can’t get the capital they need to grow, which is important for our economy."
In Greece the move by new Government is considered to be more advanced given the sudden realisation by the new Government of just how bad the country’s finances are.
Greece’s Finance Ministry said on Friday that it’s considering imposing a one-off tax on profits from banks and other companies to reduce the budget deficit.
It confirmed reports in Greek newspapers suggesting the tax, plus higher taxes on dividends and taxes on short term capital gains.
New Prime Minister George Papandreou had earlier said the country’s finances were in a "state of emergency" and the ballooning budget deficit needed urgent reforms and the state had to have cost cuts.
"We are in a state of emergency and everybody must realise that," Papandreou told parliament in an inaugural address after his socialist Pasok party won elections on October 4.
"The situation of our economy is explosive … we face a derailment of public finances without precedent," he said. The budget deficit is between 6% and 10% of GDP, debt is close to 100% of GDP (depending who you believe), the economy is still on the brink of recession, unemployment is rising.
He said a new budget will be tabled in parliament in a few days.
In London the Sunday Telegraph reported that the tax on bank profits would be a way of forcing the financial groups to pay fore the taxpayer funded bailout.
The paper said the move could include a one-off “windfall” tax on profits and forcing the banks to pay more corporation (company) tax by reducing their ability to offset losses against tax over a number of years.
The paper pointed out that it wouldn’t be the first time this move has been done in the UK.
Back in 1981, the Government of Margaret Thatcher imposed a windfall tax on banks
"Then the Government imposed a £400 million special levy on the clearing banks, which were the only part of the economy not suffering from the recession.
"The banks had to pay 2.5 per cent of their non-interest bearing current account deposits – which in the end amounted to 19 per cent of their 1981 profits."
In 1997 Labour imposed a windfall profits tax on newly-privatised utilities. That was opposed by the Conservatives, who look likely to win next year’s UK poll.
The news comes as high flying executives of big banks in the UK join their US counterparts in being paid huge bonuses because of the big trading profits they are making at the moment, courtesy of ultra cheap money from central banks and taxpayers.
Goldman Sachs and JPMorgan have set aside billions of dollars this year for huge bonuses to staff around the world, not just in the US. US papers have reported that Goldman Sachs’ 5,500 bankers in London would be paid over $A700,000 each.
And the Sunday Times
