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Mervyn King vs. Goldman Sachs

15 January 2013

15 January 2013

What did the Governor of the Bank of England think of Goldman Sachs’ plan to wait until the 50p rate is cut in April to pay bonuses? At this morning’s Treasury Select Committee, Mervyn King declined Teresa Pearce’s invitation to label it ‘morally repugnant’ but did declare it ‘depressing’, ‘clumsy’ and ‘lacking in care and attention to how other people might react’. According to the BBC, Goldman Sachs has since decided not to press ahead with the plan — perhaps they heeded King’s warning that ‘in the long-run financial institutions, like all large institutions, do depend on goodwill from the rest of society’.

Here’s the video and transcript of King’s comments:

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Teresa Pearce: ‘Sir Mervyn, just as a matter of opinion, on the recent reports of people deferring their bonuses to the 6th of April — do you think that’s ordinary tax planning or do you think that’s morally repugnant?’

Mervyn King: ‘Well it’s clearly not unlawful. Investment banks are in a privileged position, because a lot of their compensation comes in the form of a bonus, the timing of which can be adjusted. And I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of a lower tax rate which they will benefit from in the long run to a very great extent, knowing that this must have an impact on the rest of society. Even now it’s the rest of society which is suffering most from the consequences of the financial crisis. I don’t know what will happen — they haven’t made any statement — but I think it would be rather clumsy and lacking in care and attention to how other people might react. And in the long-run financial institutions, like all large institutions, do depend on goodwill from the rest of society.’


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Show comments
  • Jules

    The most morally repugnant thing is, Osborne cutting taxes for millionaires whilst the rest of us are heading for a TRIPLE dip recession. That one announcement in the Budget of 2012 has cost the Tory party any chance of forming a majority in 2015 and maybe even decades to come. It’s handed it all to Labour on a plate!

    • 2trueblue

      No it has not. Liebore can not claim to be innocent of how we got where we are. It was the result of 13yrs of mismanagement of the countries economy. They did not increase the top rate of tax over the 13yrs they were in power. They increased the gap between rich and poor, and child poverty grew in that 13yrs. These are the facts and the reality of their legacy. The public need reminding, as do the media.

  • Noa

    Has the Coalition Agreement, and indeed the tax statues, now been amended to make avoidance and evasion one and the same?

  • williamblakesghost

    It really is morally repugnant that the Government seems to think it has the right to question the national pastime of tax avoidance. Furthermore, by inference it is a wholly sinister and repugnant idea that it is the nations duty to further subsidise Government particularly ones so profligate and wasteful as those we have suffered had over the last 20 years.

    We pay taxes to provide services not so that Government can exist for existences sake in perpetuity. If we discovered a way to do without Government it would probably be the greatest day in the history of the British Isles. If the Government want more tax let them legislate for it!

  • 2trueblue

    Another loophole that should be shut. I wonder how many other organisations can shift when they pay their employees their bonus? If the monies are earned in a specific year it should be liable for tax in that year.

    • http://twitter.com/Shinsei1967 Nick Reid

      Any company can pay its employees a bonus any time they want.

      As it is banks have to defer bonuses for three years already. The money GS staff would actually be getting in their bank account in April would have been for bonuses declared three years ago.

      • 2trueblue

        And as such should be taxed for that year.

        • http://twitter.com/Shinsei1967 Nick Reid

          The top tax rate three years ago was 40p, not 45p or 50p.

          • 2trueblue

            Am aware of that, still think the tax should correspond to the year the monies were earned.

  • the baracus

    What about the sensible argument that it is morally repugnant for the state to take more then half of your money?

    • dalai guevara

      care to define ‘your’ please?

      • Chris lancashire

        So?

      • the baracus

        Well 14% of a seven figure amount is a lot more then most people pay. What ever happened to fairness and equality? It is people like him that pay for all of those services that you believe are free…………..

  • Rhoda Klapp

    I have here an illustration of the moral component of tax.

    .

    See it?

  • Chris lancashire

    Why on earth would Goldman make their employees pay another 5% tax if they don’t have to?

    • dalai guevara

      Well guess what hot shot, they have to – like anyone else, for crying out loud. What is your argument for exempting millionaires?

      • Chris lancashire

        No they don’t, that’s what the discussion is about – do try and keep up old chap.

        • dalai guevara

          What is your argument for exempting millionaires from paying tax on a given day?

          That, old chap, is the discussion.

          • Chris lancashire

            Ah, glad you’ve caught up dear boy. I’m not entirely sure what you mean by “millionaires paying tax on a given day” but if the Government creates a situation whereby paying a bonus on April 5 results in the recipient paying 50% income tax (you know that rate Labour introduced after 13 years in power and 7 weeks before they left) and by paying it on April 6 results in a 45% rate then it is perfectly reasonable to do the latter. I fail to see it requires any “argument” to support it.
            If however, you are of the strange persuasion that believes the paying more tax is morally good then no doubt you yourself will volunteer a little extra to the Treasury each year.

            • dalai guevara

              each year…
              I am not aware that I have a choice of deferring my profits to me in order to save tax.

              So, what is your argument for exempting millionaires from paying tax on a given day?

              • Chris lancashire

                Well actually you do. Delaying invoicing some of your last few weeks (in the tax year) sales is an easy, legal way. Increasing your provisions against bad debts, stock valuation losses or dilapidations is a second. As for the second part of your query – already ver adequately explained above – if there is no requirement to do then why should they?

                • dalai guevara

                  You have described how a self-employed entrepreneur operates. How could anyone in an employee scenario do the same? How can it be that city bankers on a payroll can avoid what most of us cannot?

                • Chris lancashire

                  Sorry dalai, if you want any more advice you’ll have to pay.

                • dalai guevara

                  😉

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