Tuesday, January 04, 2011

On Bluff, Bluster and British Bankers' Blackmail

This concerns an article in Britain's Daily Telegraph taking to task those who argue for cutting Britain's higher rates of income tax, saying that it will drive away financial services firms. Michel Barnier, the European Union financial services chief, has described these threats as “blackmail”.

Bankers have been threatening to leave London in large numbers since last year’s 50pc tax on bonuses and the change in the upper rate of income tax from 40pc to 50pc was announced. However, there has been little evidence of an exodus to date. London’s pre-eminence as a financial centre has only grown.

And, more specifically, it quotes a particular financial chief, explaining why:

Tim Flynn, chief executive of Haymarket Financial (HayFin) and a former Goldman Sachs partner, said the 50pc higher rate of income tax was “just the cost of doing business in London” and was outweighed by the city’s many advantages. “We could have set this business up anywhere in Europe – we looked at Switzerland and other countries – and the tax regime would have been better for us as individuals. But we chose London".

One can raise taxes on the top earners - they will scream, and treat the taxpaying public to a display of pricey toys being thrown out of high-grade prams - and then, most likely, they will stay.


Anonymous Margaret said...

If they are likely to leave, why aren't they already entirely left for the tax havens?

1:54 am  
Blogger TJN said...

@ Margaret

Banks already use tax havens very extensively, but the threats to leave the UK will never be put into practice for the simple reason that London provides a far wider and deeper set of services than can be provided by even larger tax havens like Luxembourg and Zurich. The threats are all part of the process of bankers holding the British people to ransom.


4:34 am  
Anonymous BritishBankers said...

British Bankers' Association here. I hope we can take some of the heat out of this discussion.

This isn't about people huffing off to Zurich because they are paying more tax, even if that cartoon version we most often read about.

It is about the UK losing its status as the destination of choice for the world's financial business. We are the world's financial centre, and over many years have built a critical mass of world-class businesses in the City and elsewhere which provide financial services to the world, meanwhile generating £54bn a year for the Exchequer. Please consider our concern that there could come a tipping point where public policy and incessant bank-bashing rhetoric will lead potential wealth-generating businesses to look elsewhere. And when another financial centre begins to reach critical mass, the consequences to the economy - in jobs, in GDP, in tax revenue - could be calamitous.

Business take decisions every day, weighing advantages and disadvantages. Sometimes they conduct some of this debate publicly, but that's not the same thing as blackmail.

1:45 am  
Blogger Physiocrat said...

'twould be good riddance to these parasites. Financial services produce no wealth, they are essentially an engine for stealing the wealth produced by other people in a zero sum game.

The legitimate purpose of financial services are (1) to provide safe keeping for deposits (2) to facilitate money transfers and (3) to give credit to facilitate production ie definitely not for land purchase, which adds nothing to productive capacity. All the rest is parasitic on the real economy. If these people were to leave, we would be well rid of them.

9:34 am  

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