The Great Debate UK

from Breakingviews:

Bank liability levy may not be foolish

A levy on bank liabilities would get the industry squealing - especially if it approached $120 billion. But the Obama administration isn’t crazy to float the idea. A well-crafted tax could help recoup bailout costs while also giving banks an incentive to behave more sensibly. It doesn't have to apply just to the United States, either.

Populism aside, the main rationale for a levy is that the size of a bank's liabilities is a goodish proxy for the risk it poses to the financial system - as well as the benefit it received from the cheap money central banks doled out to offset the credit crunch. It’s reasonable that banks should pay for help from their lenders of last resort.

There is one big proviso. Deposits should be taken out of the liability bucket. In the United States and elsewhere banks already pay deposit insurance fees - so including them would amount to double taxation. Any new liability tax should focus just on wholesale finance, a riskier "easy come, easy go" form of funding. With such a charge in place, banks would have an incentive to build up their deposits - something that regulators across the world are urging them to do anyway.

There is also one big question. Should such a tariff be an ongoing part of the fiscal framework or a one-off? The argument for permanence derives from the fact that it’s best viewed as an insurance premium paid in return for a continuing safety net.

from The Great Debate:

UK bonus tax both cynical and justified

(James Saft is a Reuters columnist. The opinions expressed are his own)

A cynical election maneuver it may well be, but Britain's plan to impose a punitive tax on bonus payments is also reasonably well crafted and in broad terms justified.

Facing a monumental budget deficit and an election in months, British Chancellor Alistair Darling announced a plan to slap a 50 percent payroll tax, payable by banks, on their bonus payments in excess of 25,000 pounds to a given employee.

Darling’s pre-budget should support small business

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Joe White -Joe White is chief operating officer at Gandi, an Internet domain name registration firm. He will participate in a Reuters pre-budget live blog on Dec. 9, at 12 p.m. British time. The opinions expressed are his own.-

The pre-budget speech will primarily be about two things: reducing the size of the national deficit, and drawing the political battle lines around the economy for the general election.

Pre-budget report delicate balancing act for Darling

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thomas-story – Thomas Story is tax director at BDO. He will participate in a Reuters pre-budget live blog on Dec. 9, at 12 p.m. British time. The opinions expressed are his own. -

Alistair Darling is facing the most difficult set of economic circumstances for any chancellor since the 1940s, with the projected substantial fiscal deficits for 2009 – 2010 and 2010 – 2011 likely to be revised upwards from 175 billion pounds to well in excess of 200 billion pounds. He must perform a delicate balancing act to secure the confidence of the global financial markets while protecting any fragile economic recovery and boosting public confidence.

Simplify employment tax to kick-start recruitment

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David Ellis-David Ellis is partner and head of human capital at BDO LLP. He specialises in the development of tax efficient, performance driven long term incentive plans for senior employees. The opinions expressed are his own.-

There’s no doubt about it, the UK’s complex employment tax regime is a major barrier for businesses to attracting talent. For our new report, launched today, we spoke to 126 financial decision-makers and we found that 34 per cent would be more likely to employ additional staff if taxes were reduced or reformed.

from Commentaries:

“Tobin tax” gaining ground in Europe

No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.

European Union leaders could not agree to put it on the agenda of this week's G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept.

More strikingly, the head of Britain's Financial Services Authority, which regulates the world's second biggest banking centre, said last month that such a levy could help shrink a swollen financial sector.

Wrong, wrong and wrong again – a response to “Latvia: let the lat go”

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morten-hansen1- Morten Hansen is a guest columnist, the views expressed are his own. He is head of the economics department at the Stockholm School of Economics in Riga -

The debate for or against a Latvian fixed exchange rate rages on. There are good pieces of analyses on both sides of the debate, there are less good ones, there are mediocre ones – and then there is Jonathan Ford’s “Latvia: let the lat go” from 29 July.

Budget boost for savers

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fay

–Fay Goddard is chief executive of the Personal Finance Society. The opinions expressed are her own.–

As predicted, Budget 2009 was heavy on figures and forecasts and hard on the highest earners. Unsurprisingly it is the latter that the press has picked up on. We all knew that there would be a new top rate of income tax – though some were taken by surprise at the rate of 50 percent and the speed at which it will be introduced.

from Luke Baker:

In for a penny, in for £175 billion

It may not be tax and spend exactly, but it's definitely tax and borrow.

For the best part of 12 years, Labour has pursued essentially conservative (with a small 'c') economic policies, steadily underburdening itself of the 'fiscally unreliable' tag that some earlier Labour administrations were (wrongly or rightly) saddled with.

And for most of the past 12 years, as the global economy steadily expanded and Britain's along with it, with aggregate wealth rising smoothly, Labour looked strong at the helm each time the budget came around.

A short circuit for electric cars

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REUTERS– Neil Collins is a Reuters columnist. The opinions expressed are his own –

LONDON, April 16 (Reuters) – Poor old Alistair Darling. The Chancellor is girding himself to deliver a truly ghastly Budget, and lined up a crowd-pleasing headline-grabber to distract attention from the financial horrors ahead.

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