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Monday, December 07, 2009

Windfall Tax

Governments, much like ravenous dogs, always become very overexcited at the smell of someone else's money. When they find out that there are large sums being paid out, they want a cut of the action as well.

Therefore, it should come as no surprise at all to learn that Alistair Darling is considering imposing a special windfall tax on bankers' bonuses next year.

Taxing the banks themselves would be counterproductive, as it would be taking money back that has only just been pumped in to prop them up.

Will a windfall tax on bonuses achieve very much, in a tangible sense?

That depends on the nature of the tax, and as to whether the recipients of the bonuses find a way to avoid it.

Whilst, as has become the norm with Brown, this may well play "nicely" to the gallery of envy, in the long run it will achieve very little. It will not come close to balancing the books, and will drive away high earners from the UK to other less taxing environs.

Meanwhile the Centre for Economics and Business Research has warned that in a decade, the UK could drop from being number 4, in terms of the economy, in the world to being number 11 by 2015.

heavy taxes and stifling bureaucracy will bring that possibility ever closer.

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