Goldman Threatens to “Move” 20% of UK Staff to Spain to Escape Bonus Supertax

So we now have an official demonstration of what we all knew to be true: banksters giving their right to loot their companies top priority, and the greater fool public be damned, with Goldman the most egregious sinner. That firm’s self serving protestations to the contrary, it was a ward of the state, and would not exist now were it not for the munificence of taxpayers. It continues to profit from a raft of subsidies, ranging from FDIC guaranteed debt, a whole alphabet soup of special Fed facilities, and super low interest rates. As Linda Beale points out:

A recent study suggests that big banks in the TBTF category now enjoy a significant cost-of-funds spread compared to other banks. That is, they can borrow money more cheaply, leading to greater ability to make profits, than can other banks, because of the implicit guarantee that the federal government will step in and save them because they are TBTF and pose a systemic risk. That advantage may amount to as much as 48% of the TBTF banks’ profits this year (or as ‘little’ as 9%, on very conservative assumptions). The government, by the way, gets nothing for this implicit guarantee–unlike a commercial guarantor, it is not being paid a regular premium for the service.

So a significant portion of Goldman and other big bank profits are effectively windfall profits due to government largesse. And they are paying themselves bonuses on it. That was NOT what all these subsidies were supposed to be about. They are a way to recapitalize the banks in a way that is covert not politically contentious. But the finance cohort is abusing that privilege and reverting to its pre-crisis practice of effectively stripping their firms of needed equity to pay themselves, a practice economists George Akerlof and Paul Romer depicted as looting in a classic 1994 paper. Hence the logic behind the 50% bonus supertax: it is explicitly to encourage the big banks to retain more equity and pay less out.

Goldman, per the Independent (hat tip readers Edward and Scott), is out, as usual, to have its cake and eat it too, to enjoy the benefits of all the rescue subsidies but not bear the related tool:

Goldman Sachs has threatened the UK Treasury with plans to move up to 20 per cent of its London-based staff to Spain in a standoff over tax and bonuses.

It’s believed that the Wall Street investment bank, which paid more than £2bn to the Exchequer’s ailing coffers in corporation tax alone last year, has fired a warning shot across the Government’s bows in response to the tax measures unveiled in the pre-Budget report earlier this month.

Goldman Sachs International was the biggest contributor from the financial services sector to Britain’s purse last year. Previous reports suggest that in some years the firm’s staff have contributed more than £1bn in personal income tax to public coffers.

A City source said: “Goldman could move a relatively large number of people if it wants to. Given how much Goldman and its staff contribute to the tax take, the firm has plenty of leverage. This is a bargaining position more than anything.”

The bank, which employs around 5,000 staff in London, is believed to have strong links to the Spanish government, although it has a relatively modest number of employees in the country. Although staff moving to Spain would not receive any special tax incentives, the bank could avoid paying the bonus tax, details of which, so far, remain sketchy. A Goldman Sachs spokesman said it is looking at all options as it negotiates with the tax authorities over the bonus tax.

Yves here. Negotiates? Why should Goldman enjoy any such rights in this matter? It operates in business that require licenses and benefits greatly from the massive and costly safety net that has been deployed under the financial system.

The Bank of England has indicated that it would regard the departure of banksters as a cost it is willing to bear in the interest of having a financial system that operated more prudently than the one we have now. But having Goldman shift staff to Spain and yet be part of the financial grid and therefore still able to suck off the Fed and the Bank of England when it gets itself in trouble is abuse, pure and simple.

The Treasury may blink at the prospective loss of revenues, but if the government in the UK is reasonably unified on this matter and had any guts, it could bring Goldman to heel.

I was in Japan in 1985 when the head of Merrill in Japan, which had one of the longest-standing foreign securities operations in the island nation, told me of a recent conversation with a senior official at the Ministry of Finance. Japan had pretty much no written securities laws (Japan is not a contractual society); everything was subject to bureaucratic “guidance”. Merrill wanted to do something that it regarded as permissible under the rather scanty regulations in existence; the MOF official made it clear he took a dim view of it.

The Merrill chief said, “What can you do if we go ahead anyway?” The MOF official said, “How would you like to be audited every day?”

A MOF audit was a particularly exquisite form of torture. At the start of the business day, a team would arrive, all wearing white gloves. The leader would blow a whistle, and announce, “Let the audit commence!” The auditors would run and slap seals on all the file cabinets (so they could not be opened) and impound the computers.

Now you can’t do that to a TBTF institution these days, but there are plenty of other ways the UK could punish Goldman. This is a starter list, and readers are encouraged to come up with their own ideas:

1. A departure tax on all UK staff relocated to a time zone within two hours of GMT. It should be VERY painful, the only question being whether to levy it on Goldman or the employees.

2. Harassment. This is crude but would be very effective. Given what a total surveillance society the UK has become, the officialdom probably has a pretty good handle on who in the UK works for Goldman, and if it put some effort behind it, could identify the non-UK based Goldman employees who visit England regularly, and in particular, the staffers who would be relocated to Spain. I am sure it could be made very difficult and time consuming for them to enter the UK (being whisked to a holding tank for 4-8 hours on a regular basis would put quite a dent in a busy investment banker’s schedule).

England, unlike the US, was an unashamed imperialist in its heyday (see Niall Ferguson for details) and therefore its officialdom has fewer compunctions about using throwing its weight around in an open fashion.

Upon reflection, this move by Goldman could represent a fantastic opportunity, if the powers that be in England have the will and presence of mind to take advantage of it. Goldman could be made an example of what happens when you bite the hand that feeds you.

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70 comments

  1. i on the ball patriot

    Declare them “enemy combatants” and torture them.

    Deception is the strongest political force on the planet.

  2. IF

    A departure tax is basically what the US IRS has in store for anybody leaving. It makes sure US citizen don’t go abroad for tax reasons. Which IMHO is reasonable. But evil enough, the IRS also collects for 10 years after somebody gives up US citizenship, which seems a bit steep. Most European countries have neither the first nor the more thourough second flight tax. Rich Germans regularly flee to Switzerland. But German tax authorities have been known to count tax evaders days per year spent in Germany very carefully.

    I am perfectly fine with taxing citizens abroad (until they give up citizenship), but as a practical matter playing EU countries against each other for now looks unfortunately like a winning strategy. We shall see as to how committed the UK authorities really are, considering that many people working in London might not even have UK passports.

    1. Timo

      A lot of them might not have UK passports judging by the people I worked with at other banks, but a lot of them will probably hold EU passports so moving to another EU country is not going to be a big problem – no work permits required. They might still get taxed on their UK income (for example if they own property in the UK and rent it out).

      Of course it remains to be seen how much of it is blustering by a big bad bank given that a lot of the higher-paid employees with bigger bonuses would probably be worse off moving to any other EU country; the UK has fairly low income tax rates compared with a lot of other EU countries.

  3. NYT

    If they are talking about relocating existing staff, its not believable. Chances of 20% of their staff can speak Spanish and would be willing to move their spouses and kids to a different country at a moments notice are zero.
    If they are talking about replacement of existing staff, its not believable. THey would be moving them to India or China and a one-off tax would not be a factor.

  4. craazyman

    I doubt the taxes Goldman pays remotely offset those lost from the broader social and economic damage its approach to finance inflicts.

    If Goldman wants to trot out that kind of analysis and if I were the British government I’d say, “Go ahead, punk, make my day.”

  5. MyLessThanPrimeBeef

    I have simple solution.

    Instead of 50% tax on bonuses of the 5,000 London employees they have now, make it 62.5% tax on the bonuses of the remaining 80% or 4,000 employees.

    It will certainly create division within Goldman, especially those left behind, feeling deserted like at Dunkirk.

    And if they move 50% of the staff, make the bonus tax 100%. Behind that, start negotiating with Madrid about splitting the bonus tax revenue with them if they would slap their bonus tax as well.

  6. dlr

    Yes, a 100% tax on ALL compensation greater than 200K a year, counting base pay, bonuses, stock options, perks, sweetheart loans, etc. These crooks are looting these companies. They should be stopped. Completely.

    And that’s just a stop gap measure. The real solution is to put the power in the hands of the stockholders. Pass a law that requires any compensation (of any kind) greater than 200K be authorized by the shareholders.

    Looting should be made illegal.

  7. C

    I agree with almost everybody’s comments for once (at least those posted so far).

    Having said that, the UK government could just threaten to refuse to do any business with Goldman and withdraw any obligations it has given them. As soon as the market found out that it was serious in doing so, Goldman would shut up and do an about-face very quickly, as the increased costs of capital would dwarf any advantage they could hope to obtain.

    It’s amazing to see the complete lake of shame of these people, though. I’m stunned, in fact.

  8. killben

    “if the powers that be in England have the will and presence of mind”

    A BIG IF .. Given the way the regulators are at the beck and call of these banksters..

  9. paper mac

    Was the MOF in Japan more rigorously involved in oversight back in the day, or was the audit threatening because it shut down trading for the day, not because risky or illicit activities might be discovered? My impression is that nowadays organized crime has a fairly substantial presence in the Japanese markets- I don’t know whether this is really the case or not, though.

    1. Yves Smith Post author

      The MOF was feared and respected back then. At the same time, it was widely known that the Big Four securities firms would bribe politicians by given them shares that were about to be “Stock of the Week,” meaning ramped. But that was routine corruption, not organized crime. The yakuza were not a meaningful factor in the stock market then.

      The significance of the audit threat was NOT that the MOF would necessarily find anything, it was that the mechanics of the audit (sealing files and denying access to computers) would make it impossible to function. It would shut down revenue generation and if it went on for any length of time in its more draconian form, it would destroy the business. Basically, the MOF official was saying he was willing to put Merrill out of business if Merrill would not back down.

  10. benamery21

    I like a 105% tax on compensation abroad to employees of GS currently in the UK, coupled with an additional 10% surtax on ALL compensation to any GS employee still in the UK, triggered by a decline of more than 1% in the number of GS employees in the UK from levels today OR a decline of more than 1% in the compensation share of GS employees in the UK versus total compenation to all GS employees. OH, and any TBTF firm ought to have a permanent gov’t audit team assigned anyway.

  11. Timo

    The UK tax authorities certainly know who is a Goldman employee as you have to list your employer on a UK tax return. Most of the time, tax returns are only required from those employees who pay the top rate of income tax but given that the threshold for that is quite low (GBP37,400 this tax year IIRC) and I can’t see that many Goldman employees earning less than that.

    How difficult the authorities can make it for a Goldman employee to enter the UK would remain to be seen – a lot of them will be EU citizens and as such have the right to free movement within the EU, so there are limits of what they can do.

    I do hope that the recent announcements the UK government made aren’t just blustering that (if anything) will end up mainly affecting the little guy – be it a small trading company or an individual working in banking – while the big boys negotiate or bully their way out of the suggested legislation.

  12. sglover

    Now, now. Brad DeLong assures me that it’s wrong to get upset when bankers loot the public trough and then effectively tell said public to fuck off. And Brad DeLong is an **economist**.

  13. Diego

    The UK should have nationalized (or pre-privatized, if you will) all the banks it saved. For those like Goldman, it should have attached some conditions on bonus payments.

    Since the UK didn’t, it’s only its fault that huge bonuses are being paid partly from looted UK taxpayers’ money. The same goes for the US.

    But I don’t think this can be corrected with further crazy measures. I mean, if they want to relocate 20% of its staff to Spain, there’s not much the UK can reasonably do about it *now*. Every ad-hoc measure would mean a lack of legal security and market intervention.

    Let Goldman relocate them if it can. Let the free market decide what should be done in the UK, and what should be done abroad. Taxes on finance were supposed to reduce UK’s dependence on a bubbly industry, wasn’t it? That’s what’s happening right now with Goldman; wasn’t exactly this what lawmakers wanted?

    1. Yves Smith Post author

      Diego,

      I will defer to British nationals, but the UK is a principles-based legal system, not rule-based, as the US is. The “principle” behind the supertax was to discourage banks from paying funds out in bonuses and to retain more in the business. Thus adjustments to the tax would seem to be warranted, particularly in light of flagrant attempts to circumvent it.

      1. Diego

        Yves,

        if the UK government doesn’t buy the case for “bonuses attracting and retaining talent” since bankers are not considered talented, but just looters, I can’t see what’s wrong with Goldman moving 20% of its looters to Spain.

        Spain should be the one forbidding them entry to protect its national economy, don’t you agree? If it’s all a matter of extracting more taxes from a US-based international bank which, as far as I know, didn’t receive a single pound from UK authorities, they can just raise taxes on finance (even more); but I can see how this “principle-based” ad-hoc rule doesn’t destroy the UK’s reputation for legal security and free markets.

        No matter what the UK does, since the legal and tax framework has changed there, the financial industry in the UK will be reduced and (looting?) talent will migrate to other countries.

        1. Diego

          I meant: “but I *can’t* see how this “principle-based” ad-hoc rule *won’t* destroy the UK’s reputation for legal security and free markets.” Sorry.

          1. Richard Smith

            Can’t you, Diego?

            Purely as an exercise, and certainly, only if it doesn’t cause too much mental anguish, you could try and construct some arguments for the position that such a tax, if rigorously implemented, will *enhance* the UK’s reputation for legal security and free markets. You don’t have to believe the arguments, just construct them.

            Obviously if this little workout causes smoke to emerge from your ears, then stop. Otherwise you will find the experience quite liberating.

          2. Diego

            Richard Smith,

            you can’t make a massive rise in taxes on a single industry and then expect the same foreign investment that made you the global leader in the first place.

            As Macro Man says: “A £300k bonus will become £187k. And that massive £1 million bonus will shrink to £600k. And of course, you’ll still have to pay 40% income tax on this reduced amount!” Which bank will think London has a secure, stable tax framework when taxes on bonuses have rocketed from one third to two thirds of face value in a single populist backlash?

            This personally brings me remembrances of Bolivia’s Evo Morales’ huge tax hike on foreign oil companies, or Argentina’s populist policies, which have recently been branded to be against legal security by US envoy Valenzuela.

          3. Richard Smith

            “you can’t make a massive rise in taxes on a single industry and then expect the same foreign investment that made you the global leader in the first place.”

            Global leader in what? Ruinous bailouts?

            “Which bank will think London has a secure, stable tax framework when taxes on bonuses have rocketed from one third to two thirds of face value in a single populist backlash?”

            Which legislator will think they have a secure, stable banking system when the banks recycle the bailout money into employee bonuses, rather than rebuilding their capital bases? (Apart from American legislators, of course).

            “This personally brings me remembrances of Bolivia’s Evo Morales’ huge tax hike on foreign oil companies.”

            Why, exactly? Had Morales just bailed out the oil companies with Bolivian taxpayers’ money? Does the British tax increase apply only to foreign banks?

            Oh, never mind.

          4. Diego

            Global leader in corporate and financial services, including finance, but also accounting and law services. These corporate and financial services form the backbone of the UK economy, especially London’s.

            As far as I know, Goldman Sachs didn’t receive a single pound from UK taxpayers. And Evo Morales also had a very good, populist case appealing to Bolivians’ money, which was being stolen, much as bankers are doing now according to Brown.

            As I said before, you bail them out, you cut their bonuses. But you can’t bail them out while leaving their directors and bonuses intact, and then change dramatically the legal and tax framework of the whole industry with populist measures.

            And as I said before, if you think bankers are looters, let them all go to Spain. What’s the fuss then? You made a bad bail-out, assume it, but you can’t keep on changing contracts and taxes ad hoc and ad infinitum to try and enmend *your* first, original failure (which in Bolivia’s case, according to Morales, was privatizing oil fields for a low price).

      2. Neslo

        Exactly, stop being a chump and call their bluff, and be ready to play the hand if they are stupid enough to not back off their bluff.

    2. Skippy

      Did you just use the phrase *FREE MARKETS*. That one will go down in history as the oxy-moron of the millennium.

      Skippy…no such animal as some will always tilt the field in their favor. Citizens first, business second or can we get off the growth/expansion proton accelerator please.

  14. Brick

    I think I might take a bit of a contrarian view here. Lets start with the 50 percent bonus tax which is a one off tax and appears to apply to this year only. This means the tax is actually pandering to the demand of the electorate with a view to gaining public support for the next election rather than addressing the problem. There are hints of a transaction tax coming which again seems populist rather than designed to address the issue. What they could have done is close the loophole where by many bankers pay capital gains tax rates on their income which is below what the rest of the population pays and to make sure some bonuses are paid in shares. They could also pose a transaction tax on assets held for a short period(less than a week). It is a bad tax which goes against the G20 agreement and ultimately lets the bankers continue their bad ways once this year is over.
    There was never any doubt in my mind that bankers would seek to avoid taxation, but they are not alone in doing this. Even the average joe is now trying to work out how to reduce his taxes,trying to exploit every loophole. The reason being that the tax payer is seeing a looming increasing burden without government spending being properly addressed and entitlement being properly reviewed. You could argue that actually Goldman is standing up for the average worker saying to the government remember you are answerable to the electorate but since the tax payer pays the bill you are answerable to him more so. Maybe this is a warning shot across the bows of the UK government that tax payers should expect value for you money when their money is spent.
    The diplomatic solution would probably be to allow bonuses paid in bank shares to have a lower bonus tax, however I expect the UK government to deliberately head for confrontation. If goldman and other banks decided to dump UK gilts, then I think a quick back down would be in order. The reason being not that the UK government could not win, by manipulating goldman share price, trawling through every goldman transaction and charging bankers with every irregulatory, but because there would be no support from the regulators and administration in the US which would allow Goldman to escape. The Uk tax payer picks up the bill again, the US continues to get looted and europe with the backing of the rest of the world decides it is time to play hard ball with the US.

  15. vlade

    As someone already mentioned, if the bankers are EU nationals, it’s hard to harrass them (I’m sure GS would happily pursue it with the EU court if UK denied them entry just ‘coz they are GS bankers).

    Suggestion of raising the bonuses proportionatelly are just silly. If I move 20% of the bankers out of the UK, trust me it’s those who get the 80% of the bonuses. So even raising it by 100% will only create small pain (and, let’s face it – this tax is not to hurt indivirual bankers, it’s to make the banks feel pain if they don’t behave), at the same time hurting all the other banks who did play along (and, hard as you might find it, there are some). In fact, this is the main problem – you cannot target GS too selectively, and any repercussions would hit other people who might have played with you before.

    Robert Peston had an interesting blog on related topic (http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/12/banks_try_to_deal_away_bonus_t.html), and I’m curious what will come out of all this. I don’t think Brown is a hard negotiator, not really as hard as GS boys (if he was, he would have called Salmond’s bluff on scottish referendum). Darling & BoE on the other hand I could imagine to tell GS to go and take a hike.

  16. Vinny G.

    Good riddance!

    But as a caveat, Spain is struggling with huge unemployment, and people may not have the stomach to put up with too much bankster looting, while they struggle to pay their rent and feed their families. Not only that, but that Spaniard temper has been known to boil over a lot faster than the “cool” and represses Anglo-Saxon one. I trust they’ll throw them to the bulls as soon as the bonuses are dispersed.

    Instead, I’d recommend they get relocated to Guantanamo, where international criminals like their kind belong. However, I don’t think we should impose any bonus tax on them. But we must offer them free mandatory waterboarding and torture therapy sessions on the weekends, for which they are expected to pay out of pocket at rates comparable to what an average American family has to pay for basic medical care… that way they’ll likely burn through their multi-million pound bonuses in a few weeks or sooner.

    Vinny

    1. Diego

      Reputations are made by actions. Hiking taxes from 1/3 to 2/3 on bonuses in a single populist backlash (as in the UK) may be cool and unrepressed for you.

      Certainly not for me, from this unemployment-ridden place where not a single significant change in our economic policies have been made as a populist consequence from the crisis. All this will surely build on our respective reputations.

      1. Vinny G.

        Diego,

        How are the spirits of the people in Spain right now? Do you think it may come down to civil unrest in the near future?

        Or are they scared like the Americans have been? Personally I don’t expect Americans to do much in ways of rebellions against their opressors, but I’d hope Southern Europe still hasn’t lost its mojo.

        Vinny

        1. Diego

          Civil unrest in Spain? Absolutely not.

          There is some malaise against the government for basically doing nothing during the past several months. Recent protests (e.g. against entrepreneurs two weeks ago) have been a semi-failure.

          On the other hand, as you may know, those huge unemployment stats hide the fact that many unemployed (especially in Southern Spain and the Canary Islands) are working illegally while collecting unemployment subsidies.

          A recession is not as hard to live in Spain than in, say, the US, since most people have a generous safety network (unemployment subsidies, free healthcare and education, but also family support) and those lacking it (e.g. immigrants) have many job opportunities, even if for lower wages than 2 years ago. So I can’t see civil unrest in the medium term.

          Fortunately enough, both our national parties have the proverbial British common sense which, paradoxically, seems to have been lost further north.

      2. Yves Smith Post author

        Diego,

        You are wrong in characterizing this a populist backlash. The Bank of England and others have said the measure is to get banks to retain capital, as in not irresponsibly pay out bonuses when they should be rebuilding their balance sheets. This is a shot across their bow to get responsible on pay, otherwise worse will be in the offing (as in more intrusive regulation).

        You also are incorrect in your tacit assumptions re the role of banks relative to the state. Banks are state-chartered franchises, which receive explicit support, as witness the various bailouts. The BofE DID lower interest rates, which in and of itself is a very large subsidy. They are utilities, and given how they abused their privileged status, are starting to be treated as such.

        1. Diego

          Yves,

          it is for a private company to decide where to locate or relocate its activities, taking all costs and taxes into account. GS will have an easy time arguing they are not evading taxes, but this last tax hike was the straw that broke the camel’s back; and, in fact, it may be that way. London’s comparative advantages for banking, including light regulation, relatively low taxes and a huge international pool of professionals, have all disappeared in a matter of months.

          Who’s going to decide whether GS was telling the truth or not? A judge? Moving staff is completely legal. The Government will punish GS with no judge intervention? That sounds pretty dangerous to me… It’s no exaggeration to compare this to some populist policies in South America, since ad hoc measures taken on the back of popular resentment is exactly what made the first country (Argentina) go from developed to Third World in less than a generation.

          The rule of law can’t be broken, and governments threatening with harassment, departure taxes, etc. as you proposed is like taking a Trans-Atlantic high-speed rail to La Paz, Bolivia, or at least a law-of-unintended-consequences rollercoaster.

          There are right ways and wrong ways to make the banks increase their reserves and not distribute undeserved bonuses, which are excellent goals. And this is a very wrong way, to a very frightening destination.

          1. Yves Smith Post author

            Diego,

            Rule of law? You are invoking that on behalf of companies that looted? Familiarize yourself with the negative basis trade, and maybe we can talk.

            Did you bother reading the Independent article? They took this as a negotiating stance with the Treasury. I will confess I did not see the announcement, but this is clearly in response to the supertax, which is effectively a windfall profits tax. And I have NO doubt were this to be adjudicated, discovery could easily product Goldman e-mails and other internal communication confirming that.

            Banks are wards of the state. They depend on state subsidies. They therefore need to be, and now should expect to be, regulated and taxed in a more intrusive fashion to reduce the likely cost of the state guarantee. Do you think the staff being relocated to Spain is going to suddenly be doing any different business? This is clearly an intent to flout the law. If Goldman were not enjoying state support, this would be a different matter, but it is TBTF, it has benefitted from the massive liquidity support the Bank of England provided, and now wants to thumb its nose at the government. No other bank is behaving this badly.

            The Rothschilds, which could make and break governments in its day, always took great care to show due respect for sovereign nations even thought it really had the upper hand. Goldman, by contrast, does not, and yet it is openly trying to flex its muscles. It is high time these intransigent bankers were put in their place. They are wards of the state and need to be treated as such.

          2. Diego

            Yves,

            rule of law can’t be broken to fight looters, terrorists or whatever. History tells us that when rule of law is broken, it’s broken for everyone.

            Looters (as terrorists, etc.) must end up in jail. If they don’t, the fault is on lawmakers. But you can’t try to make up for unpunished, alleged past crimes by breaking the rule of law. You can’t do it for terrorists. You can’t do it for looters.

            And yes, I bothered reading The Independent article, such a beacon of balanced, unpolitized economic news. I read that Goldman Sachs had strong links to the Spanish government and I couldn’t repress laughing out loud. Who came up with that? It’s so ridiculous…

            What we’ve got in the UK is a company which has seen taxes on bonuses shot up from 1/3 to 2/3 of face value. Since bonuses are a lot of money in that company, and combining this with many other factors, they decide to send some staff not to a tax haven, not to an unfriendly power, but to Spain, a loyal partner to the UK, a EU country with EU-average taxation, although it happens not to tax bonuses so fiercely as the UK.

            And then a newspaper manipulates this story (strong links to the Spanish government… hahahah!) and some others propose to break the rule of law in order to avoid this logical move by a *private* company.

            Sorry, Yves, you are wrong on this one.

          3. TimOfEngland

            Diego,

            I think I read into this your main objection – retrospective taxation. Be clear on this, it has not just happened to banks – with the sudden changes in pension relief rules the government has retrospectively taxed anyone earning over £150,000 (possibly 180,000) P.A. by changing the rules and making them effective immediately – they apply to the current tax year where normally tax changes are scheduled for either the following or plus 1 year.

            Re the Rule of Law, The government IS the law if they want to be, and the law just changed! True, there is a vote to accept the budget, but I don’t remember that last time one failed to get approved! One detailing a big slap for banks is certainly going to go through in the current climate.

            There are other reasons underlying the attitude to banks in the UK from the public. In a way they are being made the fall guys for many other long term dissatisfactions here. Including:
            1) Many people have suddenly woken up to the economic unfairness of the banking and credit industry – they saw interest rates dropping by 4%, rapidly followed by their credit card interest increasing by 4%! We are not amused.

            2) The bank-fee paying public just lost the equivalent of class action against unfair unauthorised overdraft charges – another few billion the banks keep.

            3) Our Postal service is currently a mess caused by lack of funding & modernisation leading to strikes. I’m not sure that the gov. realise how many people have started mini-trading on eBay and the like just to make a few ££s and obviously rely on the Post Office.

            4) Many environmentalists argue we have a golden opportunity to re-make ourselves by developing the technology and test-deploying Solar, Wind, Intelligent power grids and other systems invention and ingenuity is needed and we do that stuff well (or we used to) – What do we do instead- allow the only UK based manufacturer of wind turbines to close down for want of a tiny amount of incentive/taxpayer help. We need to become to green energy what we are Formula one! We have the technology, we need the political will.

            5) Hand-out society much of “middle England” is appalled at the free money freely available. They realise that we can no longer afford this largesse (if we ever could). Keep people from starving sure, but don’t give them enough for huge plasma TVs and phones and nearly everything that has to be worked hard for by working people. Although not quite accurate this is the perception!

            6) Many rules are made by the gov. to foster “political correctness” and “racial equality”. None of it is actually working in the way they think it is. There is no rule of equality Law for Brits! I’m NOT advocating the BNP attitude here but something will give eventually.

            7) In the UK, mega corporations are a disaster for their customers. Every one talks about it – we literally pray that any thing connected to a large enterprise just keeps working! The phone call agony that ensues when you need to talk to someone is, well, don’t go there…

            There is a lot of other stuff bubbling just beneath the surface. The banks are in the wrong place, pissing of the people, at the wrong time!

            Apologies for the length, but you got me started!

          4. Diego

            TimOfEngland,

            I may agree with many of your frustrations. Let me adress what I don’t like about the super-tax and other proposals:

            1. Rule of law. Harassment, laws and taxes applying to a single company to be punished (departure tax, higher bonus taxes only for GS, etc.) plainly go against the rule of law. Period.

            2. Legal insecurity. Retrospective taxation is a concept foreign to liberal democracies and stable tax frameworks. The full effect of the so-called super-tax is not this one-off tax, but the precedent it sets. No financial institution can be sure about the approximate tax framework they’ll work with just 2 years from now, or even in 2010.

            You can’t recruit people, sign contracts or get financing if you can’t tell your counterparts that the tax and legal frameworks won’t change significantly.

            As we’re accustomed to being “developed”, we may have forgotten how important legal security is for business. I’ll try to explain it in one word: Argentina.

            3. London is not for the British. Astonishingly as it sound, London’s financial institutions basically work for non-British companies and people. Thus, the UK has no leverage at all; they can restrict GS’ operations in the UK (which would mean breaking the rule of law, increasing legal insecurity and annoying European partners), but the UK would be the losing part: London can be easily replaced by a combination of other European cities (say e.g. Amsterdam, Madrid and Geneva). London does need finance (even if it needs to avoid overdependence); finance does not need London.

            4. The Single Market. The rule of law also means the rule of European law. You can’t limit the movement of capital and labour around EU countries, since that runs directly against EU laws. Oh, frightened London has changed its mind and wants Brussels to regulate finance at the EU level, after decades opposing just this, and put a EU-wide super-tax?

            So if you still decide to ignore points no. 1, 2, 3 and 4 and go ahead with your undemocratic, anti-capitalistic, nationalistic, anti-European and plainly fool measures, let me sum up the consequences in one single word: Argentina.

            P.S.: As I said before, you are basically trying to re-write a stupidly done, no-strings-attached bailout. Just forget about the blonde that stole your heart and money and move on; anything you can come up with to punish bankers *now* (instead of at the right time, i.e. upon the bailout) will only make matters worse.

          5. TimOfEngland

            Good Reply Diego,

            Interesting discussion In reply:

            1) I don’t think it will come to this or that anyone (except Yves) is proposing it. Also these super taxes have caught a lot more companies than just banks for instance see here:

            http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/12/bonus_tax_innocents_punished.html

            2) I agree retrospective taxing sets a bad precedent. But as we have said it is a populist move 4 months before a general election.

            3) Again correct – so why did risk fall on us the UK tax payers? Answer: we have some STUPID banks. Too intertwined. Too much risk. We now have 5 resident banks who have asset books that exceed UK Annual GDP totalling 6.1 Trillion! Maybe this is too much risk for us to bear?

            4) No, but we can make it damn uncomfortable for them and again maybe someone at the top is frightened, time for change then!

            These actions may not be undemocratic (no one asks the people anything these days, referendums? What are they mythical it seems). Anti-capitalistic? In its current failed and predatory banking form it needs opposing! Nationalistic? Well, we’re brits give us a break :) that would be like asking Asians/Arabs to stop haggling over the prices in shops! anti-European? Actually the UK seems to one of the few countries that at least tries to implement the EU rules as envisaged. Others seem to take the attitude “Oh that rule?” The EU rule thingy we signed? :(.
            Plainly fool? Time will tell.

            P.S.) Agreed, but that is where we find ourselves. And! We will find that blonde, marry her, then divorce her just to get half our money back :)

  17. TimOfEngland

    It’s about time someone in politics stood up and was counted. Cynically of course here in the UK the election is probably less than 4 months away…

    We will see if the chancellor has the balls. Unfortunately if it follows the last 2 years of this governments pronouncements, he will be found lacking.

    I, possibly like the majority, in the UK feel that the government has screwed up badly, that the banks have looted the economy and that we, our children and possible our grandchildren have years of higher taxes to look forward to as a result.

    Populist this tax may be, but from the common view it has right on it’s side. It feels like revenge but is probably closer to the English phrase “just deserts”. I for one would let them and their mirage of economic input just go.

    Tim

  18. Jim in SC

    Britain has worked long and hard to make London competitive with New York as a center for financial services. With this action they risk that status. The nation will be poorer as a result.

    1. Francois T

      Poorer in banking will give them an opportunity to get richer by building up or rebuilding economic sectors that can generate useful goods and services for a change.

      It’ll be painful, yes. But banks are wards of the State. There are many ways to do banking. The existence of the GSses of the world is nothing preternaturally ordained by the laws of physic for the Universe to function properly.

      And BTW, for IBs like Goldman Sach to thrive, they need a rather special environment that society provides; and that is what’s so galling about those rear echelon mother f*ckers. They want us to believe they’re private entities just like any others.

      Not true. They can’t exist anywhere, wherever they wish, and England just woke up to this reality. More power to them!

  19. RueTheDay

    Banking is a regulated industry in pretty much all countries. If Goldman wants to play games like this, all the UK has to do is say “we’re revoking your legal authorization to conduct ANY business whatsoever within the UK or with UK based firms effective immediately”. I said the same thing when UBS wanted to play games with the US government about revealing the names of account holders engaged in tax evasion and other criminal activity. Revoke their ability to do banking in the US. And guess what, they eventually complied.

    1. Diego

      Are you comparing massive tax fraud with a company’s decision to move staff from one country to another one? Taxes ad hoc, harassment of expatriates, revoking of authorizations if they take decisions which have always been and still are legal…

      Are we losing our mind? With the financial crisis, we noticed we weren’t that different from banana republics. After reading these proposals, I think we may have even more similarities than previously thought.

      1. RueTheDay

        If a firm wants to move operations around specifically to avoid taxes or regulations, then yes the sovereign has the right to restrict the operations of those firms in their country.

        1. Diego

          Of course they have that right, but London is not a financial hub because of the UK market, but because global financial corporations chose London as their headquarters-of-choice for Europe, partly because of light regulations and low taxes.

          If Goldman Sachs were to leave the UK because of your proposal, it would show: 1) the UK has lost its pro-business tradition; 2) the UK has lost its respect for the legal framework, and has started to implement ad hoc populist measures as if it were a banana republic; 3) judges have stopped from being independent; 4) they have no interest whatsoever to keep on belonging to the European Single Market, which is based on the presumption of freedom of movement for both labour and capital.

          The end result would not be just the direct loss of 1bn pounds in personal income taxes, but massive capital flight and a full-blown financial crisis.

          Remember: you are not a banana republic only for as long as you don’t behave like one.

      2. TimOfEngland

        Diego,

        You have to realise that according to reports from the BoE the UK came within FIVE MINUTES of shutting down it’s ATM network. That is what global banking nearly caused! There would have been riots and absolute pandemonium. Having rescued the entire system the UK, US and other Governments requested in fairly strong terms that the banks restrain themselves for just one year. Their reaction to that request: Game the system for massive profit and pay even bigger bonuses once again in the case of G-S!

        We have to do something to make these people listen.

        1. LearningfromDogs

          ToE, Agree very strongly with both this and your next comment.

          There is something fundamentally sickening to see GS sticking their fingers up at a democratically elected Government, however much I disagree about this particular Government.

          If anything demonstrates to me that Too Big To Fail is Too Big To Exist then this behaviour by GS is it!

        2. Diego

          The UK, the US and other Governments would not have needed to rescue the global financial system if they hadn’t blown it up earlier with faulty regulations.

          But you can’t remedy that first, original error with another faulty regulation (limiting bankers’ salaries de facto) now.

  20. guttersnipe

    I have a better idea G-S. Why not move your entire operation, lock, stock, and barrel, to Spain. Good riddance!

  21. TimOfEngland

    @Jim

    I believe it is already on the way out. Much as us brits don’t want to know, the old school tie, the corruption, the insidiousness of the wealth extraction, the huge inequality it is creating, the coming clampdown on tax havens, the UK’s credit rating, the UK’s LACK of much other meaningful industry and therefore it’s ability to repay it’s loans (when the premier league banking goes starts going downhill).
    We ARE NOW poorer by having them. Time to invest in the future. Time to relearn our old innovative skills. Invent and market etc… The US will follow this trend, global banking practices have done nothing for us except create a layer of mega rich sitting on a huge stratum of poor and hungry. Sorry don’t get me started! We need good, solid, boring banking. The fad for global banking will fade like all those tulips did.

  22. Siggy

    Ah, a principles based legal system. Well then, is not the bonus a one time extraordinary windfall? Then, why not a windfall profits tax?

    Don’t tax the recipient, tax the payer! Now there’s an interesting incentive. Who can manage to lose money the fastest?

    Reality check. Banksters don’t need to be at any specific location, they need a communications link. You can do what they do and be anywhere so long as you have a comunications link.

    Is this a populist move by the government? On it’s face it certainly appears to so. Is it something that on principle alone that should be done? Indeed it should, but tax the payer not the payee. Then be a bit draconian and raise the employee’s individual tax rates. Nice progressive scale that ultimately confiscates 100% of that income above say 200,000 Pounds.

    Bear in mind that I firmly believe that tax avoidance is a civic responsibility. Be very clear, I believe tax evasion is a crime, but avoidance is an important way by which you, the citizen, can influence the government. And, always be very clear that anything the government pays out has to come from you the citizen. The government does not have a retained earnings account, only a taxing agency.

  23. john

    This is what you get when you help out the banks. They are only here to serve themselves and make money. They do not live by country, life or liberty but by deception and fraud.

    1. It was wrong to bail them out. should have took the pain and let them fail.
    2. its wrong to tax. Inflation is the hidden tax that on one knows about.
    3. Government intervention in the regulation of pay is socialist. The Gov’t shouldn’t have intervened in the first place they should just create fair ground rules and let the market take care of itself.

  24. Vinny G.

    I, being one of the few (along with Dr. Doom) who sensed this crisis coming a few years in advance, which profited me nicely as I sold all my US properties 3 years ago and invested in gold, believe I am qyalified to make a few predictions. Thus, please allow me to get out my trusty crystal ball, and predict what will happen to Goldman Sucks and its scumbag CEO within the next 3 years.

    First, they will move to Spain. At first 20% of their most outrageour bonus recipients, and shortly thereafter the rest of their staff. However, the Spanish, while their country sinks into a depression., won’t be amused by the next round of GS bonuses. So, sometimes in 2010 or early 2011, Mr Lloyd Blankfeld or Blsnkstein, or whatever the hell his name is, will be served with an eviction notice from Spain, along with a confiscatory bonus tax. 

    Second, the rest of the EU will come together and implement EU-wide legidsation against vermin like GS. Thus, from the Atlantic Ocean to the Black Sea and from the North Sea to the Mediterranean, there will be no place for gangsters like GS. Additionally, non-EU Europesn nations like Switzerland and Norway are likely to pass similar laws. So the GS scumbags will be off the bsck of Europe.

    Third, by 2011 the US is likely to be in near total chaos. Evicted homeowners and their hungry families would be marching on Wsshington, while our glorious President’s African-American brothers (whom he has so shamelessly betrayed for the bunch of bankster thugs he has surrounded himself with) will be protesting in the streets of all major cities, full of desperation and anger. America’s brutal police force would be shooting our president’s brothers in the streets, while he would be preparing his thank you speech for the next NoBull Prize he’s sure he’ll receive again. Evidently the good ‘ole US of A will no longer be a suitable location for GS, so they will disband in a hurry, while also failing to pay their last taxes.

    Fourth, Mr Lloyd Blankberg or whstever his name is, will illegally flee the US, aling with his VPs. They will first try to obtain safe heaven in Russia, but Putin will turn them down. Then they’ll try Israel, which will initially offer them assylum. But, under immense populist pressure, our newly enlightened President will finally draw a line in the sand with that genocidal Middle Eastern nation and demand Mr Lloyd Blanksman or whatever his new Yidish name will be then to be extradited to the US, along with the billions he stole from the US taxpayer chumps. 

    Meanwhile, Mr Lloyd Blankstein or whstever his new name will be, is goimg to be declared an international criminal, and the Interpol, FBI, and other such agencies will be on his tracks. 

    Fast forward to 2012. Israel, being the double-crossing nation that it is, will “mistakenly” allow Mr Lloyd Blanksfeldt, or whatever his name will be that year, to slip away with half his cash and his underage mistress (because our glorious GS CEO also happens to be a pedophile piece of shit). Yet, being the paragon of virtue that he clearly is, he would have long abandoned his not-so-sttractive-anymore wife of 20 years along with all their children in a sea village in Somalia.  

    Next, with the help of Somali pirates, Mr Lloyd Blankstern with his child mistress in tow, are smuggled into South Africa, where he is immediately arrested, but is eventually released by a corrupt judge in exchsnge for half of his remaining cash. 

    Next, Mr Lloyd Blanksfuck abandons his mistress in a seedy hotel near the Zimbsbwe border, but not before he beats her unconscious and steals her purse and the gold Cartier watch he gave her 3 years ago at his condo on Fifth Ave, NYC, when she turned 15.  

    Tired, dirty, alone, and with only 2 million USD in cash plus a Cartier ladies wstch that does nit fit on his wrist, Mr Lloyd Blanksberger shows up on foot at the Zimbabwe frontier crossing, and tries to bribe his way into the country, which by then will be the only nation on Earth willing to offer our tycoon safe heaven.

    The Zimbsbwe customs officers advise our refugee that they are more than willing to allow him in, however he will have to exchange his 2 million USD for Zimbabwe Dollars, and the exchange rate will be one-for-one. This will supply Mr Blanksburger with enough cash for a small cup of coffee. Similarly, under suspicion of theft, he will have to surrender his mistress’ Cartier, as it obviously does not look like something that would belong to him. 

    Six months later, as Mr Lloyd Blankfellu (by his new Zulu name) is making a comfortable living consultimg for Nigerian email scam artists stealing Florida old ldies’ life savings. 

    However, mesnwhile the Interpol and the FBI have successfully negotiated Mr Lloyd Blsnkfellu’s extradition to the US, where he is sentenced to 150 years in prison. He is assigned to share a cell with Bernard Madoff, but Bernie immediately overpowers Lloyd, and designates him as his bitch. 

    Finally, for the next 150 years, our high-flying former GS  CEO will start his mornings by first giving Bernie Madoff a blowjob. And, since Bernie likes to pop in Viagra like Tic-Tacs, his bitch Lloyd will have to give Bernie blowjobs at lunch, dinner, as well as twice a night.

    Okay, my crystal bsll is running out of juice, but what I saw in it about Goldman Suvks and its glorious CEO is surely going to pass. You count on it.  All we have to do is wait. Evil is its own worst enemy and always burns itself out. Let’s just wait for GS to burn out and let’s enjoy the show to surely follow.

    I hope ya’ll enjoyed my crystal ball reading for today.  

    Vinny

    1. TimOfEngland

      Pretty good crystal Vinny. But your text will probably be pulled :(
      P.S. can I have some of what you smoking? :)

      1. Vinny G.

        I’m not sure what this stuff I’m smoking is called, but it was given to me as a free sampler at a Dutch coffee shop near the French border earlier today :)

        vinny

  25. Francois T

    But having Goldman shift staff to Spain and yet be part of the financial grid and therefore still able to suck off the Fed and the Bank of England when it gets itself in trouble is abuse, pure and simple.

    Then, all the British authorities have to do is to call their bluff by raising the supertax to 55%, look at Goddamn Sachs in the eye and tell them: “I like it, don’t you?”

    GS’s reaction would be rather predictable; threaten to move 30% of their personal instead of 20. Brits would then suggest, with a contrite and sorry look in their faces, that, after careful consideration, a 60% level might fit their needs just peachy-dandy thank you very much. Of course, while doing so, British authorities would vehemently deny any rumor of these maneuvers.

    Me think the message would be rather transparent: you lost we win, get a life, otherwise, you are free to leave altogether.

    After all, is any country in Europe ready, willing and able to accommodate Goldman Sachs in the present context?

  26. William

    Its a silly threat, and it does not make any sense. Why Spain? Its not credible. The comment is made out of spite or worse, maybe the director in London has a Spanish vacation home. In terms of taxes you are not getting any benefits.

    If they said Ireland, the threat would be far more credible and would make sense. Most European companies have a HQ in Ireland for tax reasons.

  27. Myles SG

    Yves, you are delusional. The City has contributed a go**amn QUARTER of the Exchequer’s revenue since the Big Bang in 1986, and while you can punish the bankers short-term (i.e. not all inputs are variable in the short run), there is no way, NO WAY ON EARTH, London can continue to be the second financial of the entire friggin’ WORLD if the British Government takes a persistent attitude of antagonism toward the bankers.

    Just wait for the moment when Harrod’s has to down-size, or the grand public schools close, due to the banker exodus; that will be the moment of Labour’s extinction in the English heartlands, and I dare say that the English will be quite angry enough to string the Labourites up on poles.

    1. TimOfEngland

      “NO WAY ON EARTH, London can continue to be the second financial of the entire friggin’ WORLD”

      As mentioned – someone may be waking up – Labour IS a socialist government – maybe some one in Labour has just realised after 12 years, how far from their ideology they have wandered while in the pockets of the bankers?

      Maybe we can’t afford to have the bankers any more?
      Maybe we don’t want to worry about the bankers any more?

      Maybe, I’m not sure the chancellor can think this way, but maybe they are a touch worried that there will still be a global financial meltdown phase 2, and maybe they don’t want the UK getting tangled up in it? If this one cost nearly a trillion, how much is the next one going to cost? 4, 5 trillion? We don’t have it lose, no country has.

      Maybe someone is actually asking these questions?
      Maybe it’s a cunning plan? send them ALL to Mainland Europe and the Euro, maybe they can afford it and the Euro stand the devaluation? Wouldn’t it be lovely :)

      “Just wait for the moment when Harrod’s has to down-size, or the grand public schools close, due to the banker exodus;”

      You think that is gonna cause riots? Huh? We don’t all shop in Harrods. Very few go to the “banker breeding ground” public schools. They would not be missed by the public I assure you. There might even be a small cheer in the current environment :)

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