Goldman takes big hit from UK bonus tax

Goldman Sachs Group Inc reported a big hit Tuesday from a one-time British tax on bonuses.

Reporting second-quarter earnings, the investment bank disclosed it would set aside $600 million to pay a one-time United Kingdom bonus tax.

That leapfrogged Goldman past JP Morgan, which reported last week that it would pay US$550 million to the British Treasury as its share of the tax.

Bank of America Merrill Lynch reported a charge of US$425 million for UK bonus tax in its second quarter earnings.

Deutsche Bank reported in its first-quarter earnings that it had paid €120 million (US$155 million) in UK bonus tax.

Britain's Treasury has said it expected to collect £2.5 billion (US$3.8 billion) from a one-year tax of 50 per cent on bank bonuses in excess of £25,000 (US$38,000) granted under arrangements made between December 9, 2009 and April 5.

The Treasury has yet to release a final figure because tax payments are not due until August 31.

Among Britain's big banks, Barclays has reported it will pay £225 million (US$342,000), Royal Bank of Scotland will pay £208 million (US$316.5 million) and HSBC estimates its contribution will be US$355 million.

Big bonuses

Former Treasury chief Alistair Darling announced the tax in December, saying it was intended to claw back a chunk of the big bonuses at some of the banks which had benefitted from the government's massive investment in bailing out troubled financial companies.

Darling said banks should be using their profits to rebuild their financial strength, not pay fat bonuses.

The notion of making banks pay for the credit crisis remains popular.

George Osborne, who heads the Treasury in Prime Minister David Cameron's government that took office after elections in May, announced last month that the government intends to levy a tax on bank balance sheets next year.

That tax is expected to raise about £2 billion a year, but the blow was softened by the government's plans to reduce the rate of corporation tax from 28 to 24 per cent over four years.

"London is a very important place to do business," David Viniar, Goldman Sachs' chief financial officer said during a conference call with the media. "I would expect we'll continue to do business there."

Still, Viniar did say the bank regularly looks at tax and regulatory implications when deciding where to operate its offices.

Viniar also said the bank regularly discusses rules and taxes that could affects its business with regulators and taxing authorities in all the locations where it has offices.

AP