City bankers are returning to work this week to grapple seriously with the question of whether parts of their business could be relocated to friendlier jurisdictions, tax experts said yesterday.
With Goldman Sachs emerging as the latest bank to investigate whether some of its London operations could be exported in the wake of the banker bonus tax, accountants said that the serious cost-benefit analysis was now just beginning. Alex Henderson, a tax partner in PricewaterhouseCoopers, warned that the threats to move from London were not just sabre-rattling. “We had all the emotion before Christmas,” he said. “Now people are coming back and in the cold light of the new year looking at the hard numbers.”
Mr Henderson said that banks’ finance directors and chief operating officers would be re-examining the case for relocation in the light of the bonus tax, under which banks are liable for a new 50 per cent levy on any bonus in excess of £25,000 paid before April 6.
The anger was not just over the new tax, Mr Henderson said, but also over a series of reforms to income tax, national insurance and pension rules, which have left highly paid bankers and their employers significantly worse off over the past 18 months.
Stuart Fraser, chairman of policy in the Corporation of London, which runs the Square Mile, told The Times that fury among bankers was running high. He said: “I have never in my entire career seen so many angry people. I have never seen people just so frustrated and feeling coshed all the time.”
At some point, probably after the general election, some people were likely to vote with their feet, Mr Fraser said, adding: “There is a tipping point. If we’re not there yet, we’re so close to it we can barely breathe.”
Mr Fraser said it was the unpredictable and retrospective nature of the bonus tax that so incensed people, and some banks felt they could start to move quite quickly. “I talked to a very major bank which said, ‘We can move 300 people out in two weeks’,” he said.
However, for most banks, any major move from London would be fraught with difficulty because a cluster effect means that so many of their clients and suppliers are based in the City. One banker said that it would take further adverse tax and regulatory changes to force existing operations elsewhere, but that London might well be shunned for new projects.
Goldman Sachs, one of the biggest and most successful investment banks, is reviewing whether to move some of its operations out of London to lower-tax jurisdictions. The review is at an early stage, and although it has been marked as more of a priority than in the past, it is still not regarded as urgent. Goldman may yet decide not to relocate any of its operations.
However, if the bank does opt to move departments or teams offshore, it would be a major blow to government efforts to keep the City as a leading global financial hub.
In its last financial year, Goldman paid £1.1 billion in UK corporation tax, making it the biggest contributor from the financial sector, and its 5,500 London employees pay millions of pounds more in income tax.
Attempts to move people to more benign jurisdictions have been rare. UBS transferred a few dozen foreign exchange workers to Switzerland three years ago and some hedge funds have moved to Swiss cantons, but most institutions have until now regarded the advantages of operating out of London as outweighing the drawbacks.
Some staff in Goldman and several other big City investment banks, including Société Générale, BNP Paribas, HSBC and JP Morgan, have reportedly requested a move from the UK because of the new tax.
Tullett Prebon, an inter-dealer broker, said before Christmas that it was offering its staff a chance to relocate to avoid the so-called “supertax”.
JP Morgan, the US-based investment bank, is considering scrapping plans to build a new £1.5 billion European headquarters in London at Canary Wharf.
Last month, Goldman’s top executives in the US agreed to forgo cash bonuses for 2009 in reaction to intense pressure over its pay policy in the months after it received a $10 billion (£6 billion) taxpayer bailout. Lloyd Blankfein, the chief executive, and the 29 other members of its management committee, said they would receive their share of the estimated $22 billion bonus pool in Goldman shares, which cannot be sold for five years.
However, many of Goldman’s top bonus earners in London are not part of the management committee.
From The Times
Patrick Hosking and Robert Lindsay
No comments:
Post a Comment