If you are a high earner with international skills and don't like paying tax, then it may be time to leave the City of London. As the graph below shows, from 2011 the City will be the most highly taxing major financial centre in the world.
When the new 50% rate of income tax and taking into account social security payments, a banker earning £250,000 in the City of London will keep only half of their gross income.
This is a lot lower than other European centres such as Paris (58%), Frankfurt (60%) and Zurich (68%) and far less than Dubai (95%).
click on the image to enlarge
36 comments:
What graph?
The one that disappeared when I posted the message, but which is now back.
Ah that graph... isn't blogging fun when things disappear and some pillock notices?
I am at a loss to understand why any banker should expect any sort of reward for lemding something that is not his, to someone else. I also at a loss to understand why any banker should expect any sort of reward for lemding something that does not exist, apart from in his mind, to someone else.
The entire banking world is the biggest scam on the globe. It is a bigger scam the Politics and/or Religion. The sad thing is that there are many making millions out of it who do not really understand just how immoral it is.
This graph is the height of mendacity, why are you not including future tax rises in any of the other places? And who cares about Dubai? Is that really the sort of place we should be comparing London to? A tacky nation built on slave labour with an appalling human rights record.
Also, why should some people who haven't paid their council tax gone to prison but not some of the wretched people who got us in this mess in the first place? Who has committed the greater crime?
Really worthwhile comparing London to Guernsey too, this is the most stupid graph I have ever seen
great graph.it shows you what a back water we could become.
If we do end up becoming a backwater it will mostly because of what you and your fellow bankers have done, have you not seen the absolute chaos you people have caused? Why on earth shouldn't people on high wages pay slightly more of their income during times like this? Do you seriously think the Tories will reduce this rate any time soon when they get in next year? If the financial institutions of the world had done their jobs properly none of this would have happened and tax wouldn't have had to go up to help bail you lot out. Move to Guernsey or those bastions of human wrongs Dubai or Singapore if you don't like it in London.
The Beast:
"why are you not including future tax rises in any of the other places?"
The UK tax rise has been announced, so is something that rational people will act upon. Please tell me about any announced changes because I am not aware of them. I suspect that there will be few other large tax increases because other countries do not run a budget deficit equal to 25% of government spending.
"Really worthwhile comparing London to Guernsey too"
And in what sense is Guernsy no a financial centre? PLenty of financial businesses could choose to move there from London if they so wish.
I suspect that uou are not a fincier but a politician (would-be or otherwise), because your thoughts are so disorganised that you are only able to formulate a polemic. You sound like ed Balls.
Still, never mind. Read my further post. You might learn something:
http://alexmasterley.blogspot.com/2009/05/abit-more-on-50-tax-rate-tax.html
The Beast:
"If we do end up becoming a backwater it will mostly because of what you and your fellow bankers have done, have you not seen the absolute chaos you people have caused?"
Government funding into RBS/Lloyds etc ~ c. £35 billion
Annual government expenditure in excess of tax receipts - £175 billion for 2009 and about the same for the next 4 years, so let's call than the best part of £900 billion.
Doesn't really compare, does it?
Thanks for your response. Interesting you only include levels of government funding and miss out the amount of liabilities from toxic debt which the government has "insured". Why did you miss this out of your calculations? If you think the governement will only end up giving £35bn to the banks on the back of this crisis you must be insane.
I had a look at you other blog and was interested by this quote...
"Let us assume that a typical executive in one of these firms earns a salary plus perks plus bonus of £150,000, not a huge amount in today's world"
...not a huge amount eh? On the basis of what workers in the upper echelons of the financial sector earn, then no it isn't a whopping amount, but anyone on that salary is amongst the top 0.05% of earners on the planet. So even if you are taxed 50% on earnings over £150,000 you are still earning a fantastic wedge.
The Beast:
I am sure the tax payer will be delighted to know that all of these tax increases are being used to pay for your web surfing at your NHS job in Derbyshire.
There are plenty of people in the NHS who earn just as much. I am not justifying the amount, I am simply saying that it happens and that a company, whether it is Goldman Sachs, Siemens or Procter & Gamble, can choose where they locate their businesses and their excutives.
Thay have no reason to bring them within the UK tax net to pay for your daytime web surfing, and since they make these decisions on purely economic grounds they probably won't.
That £35 billion is our damn money, which no bank had an entitlement to! Miners, steelworkers and car builders got no such help. The bailout has caused downstream pollution and imposed such social damage on innocent bystanders, that the government's spending to save these people from dying more quickly has to rise far in excess of the bailout. Why can't you understand that? Move to Guernsey or Dubai, the lot of you. At least we'll know where the lot of you are so that we can avoid you.
What makes you think I'm a public sector employee in Derbyshire? And why do you think it's not the done thing to do a little web surfing on a lunchbreak? You should be flattered that I find your blog interesting enough to respond to -even if I don't agree with much of what you say.
By the way, you again use misplaced exaggeration to prove an invalid point, by saying "plenty of people in the NHS earn more than £150,000". That is total (Ed) Balls. You need to stop generalising. I would be surprised if more than 1,000 out of 1.4m NHS employees in the UK earn £150,000+. Hardly "plenty" of NHS employees.
beast is a fool
Cheers Adam, you're really cutting me down to size there
I can't believe Alex tried to claim that the UK bank bailout has only cost £35bn! It's this sort of mathematical ineptitude and dishonest reporting of figures that has led us all into this mess!
And in what sense is 1,000 people not "plenty"?
Not everyone in a multinational company earns over £100k, but plenty do, and it is where they are located that determines to a disproportionate extent how and where that company grows and thus the consequent impact on the economy. Perhaps something that you, sitting as you do in a government funded organisation never consider.
The reality, as this country discovered in the 1970's and is having to relearn, is that the rest of the world has choices and can choose to limit their presence in the UK if we give them any incentive to do so. This is relevant to all businesses, but particularly relevant to the City because there are so many highly paid foreigners working in the City who can operate from a desk or trading floor anywhere in the world.
I reiterate...if this is your contribution to life on earth - this money-grubbing, dishonest, yet wholly incompetent attempt at high finance, then go and go now. Your contribution is not required any more than we need ex-British Leyland workers that had no idea how to build a decent car. Your current performance in banking and finance makes the BL workers' efforts look positively expert, by comparison.
The Beast:
"I can't believe Alex tried to claim that the UK bank bailout has only cost £35bn! It's this sort of mathematical ineptitude and dishonest reporting of figures that has led us all into this mess!"
So far that is all that it has cost. The government was paid insurance premiums to insure those guaranteed amounts. It may have to pay up on those but at present it is sitting on the cash from the premiums which actually reduces the amount is has paid into the banks.
Even if you quadrupled the amount of money the governmeent might spend on bailing out the banks, it wouldn't come close to the budget deficits which are causing far more harm. If the world knows that the shortfall in tax receipts compared to government expenditure (£175 billion) is greater than the amount of taxes raised though income tax and corporation tax, then they will expect a massive increase in personal ad company taxation and avoid investing in the UK. That is a process which started a long time ago. The current economic problems will not go away until that problem is addressed.
Alex, you are incredible. Your ignorance and arrogance is breathtaking. All money is debt. Without debt there can be no money. So, if the government runs a deficit, that is because there is no other way to be economically active. And the people that "loaned" the government all this money couldn't show it to you if asked. It's all just figments of their imagination living in the bits of some computer memory. It represents no value at all until it is converted into a repayable debt, secured against hard assets over which the lender really has no legitimate claim. It's a con and always has been and there is no compunction, moral or otherwise, to pay interest on money that springs into existence when the "lender" loans it to a government. Who else would that lender lend it to? What other use would that money have? There is no opportunity cost, so there is no basis for an interest payment or even a repayment. Be honest.
Alex: "And in what sense is 1,000 people not "plenty"?"
Out of a worksforce of 1.4m how can it be plenty? Are you the sort of person who resents anyone in the public sector earning a decent wage when they reach the top end of their particular sector? You think they should all be on the minimum wage or something?
You sound like you are stranded in a naive Cityboy coccoon and incapable of acknowledging the flaws of the system you are a part of, and the damage it has inflicted upon the rest of us in recent times.
"That £35 billion is our damn money, which no bank had an entitlement to!"
Fair comment, but the most of the banks weren't actually insolvent, but had less capital than required to meet international statndards
(4% of assets). The government told the banks they needed to raise more capital and thus bought into them at a knockdown price, having messed up as a regulator.
"Miners, steelworkers and car builders got no such help."
Not so. The steel industry was getting government funding to cover losses at a rate of £ millions a week in the 1970's and British Leyland's losses were stupefyingly enormous. Mines were kept open for years by the NCB when it was jknown that they were uneconomic and it would never be otherwise.
That doiesn't justify bailing out the banks, but by and large the management responsible for creating the problems at RBS and HBOS have gone and unlike steel, coal and cars where alternatives were available at economic prices, it is hard to see how and from where you could create a national and international banking system overnight without the current organisations in place.
An alternative design for a national and international banking system exists. It could be built far more cheaply and quickly than you would like to think and can operate entirely independently of you and your ilk. At a stroke, financiers and bankers would be as extinct as those other industrial age dinosaurs we've been discussing. You should not be smug or complacent about your place in the world, your value to the rest of us or the non-availability of viable and economic alternatives to the system of finance you've been accustomed to. It's all much closer than you think.
"...by and large the management responsible for creating the problems at RBS and HBOS have gone"
Yes, but they were recognised and promoted as being the cream of the crop so how likely is it that their successors will be any less likely to screw up to a similar degree? Seems like a positive move on all accounts that London will be the most highly taxed financial centre in thw world.
"Out of a worksforce of 1.4m how can it be plenty?"
Plenty is an absolute, not a relative term. The point that I made in the previous post was that for international staff of companies there are many people whose taxable income exceeds the new higher threshhold and it is those people who are most mobile.
"Are you the sort of person who resents anyone in the public sector earning a decent wage when they reach the top end of their particular sector? You think they should all be on the minimum wage or something?"
No, but I resent a public sector that only raises 75% of the money that it spends, and which knows that if it raises taxation any more the source of revenue will disappear so it borrrows unsuystainable amounts.
Government spending has risen 80% since 2001 while private sector GDP has risen less than 20%. Alowing for inflation, you could call that practically no growth in the private sector in the last 8 years (despite the "fiscal stimulus"). This policy hhas hit the buffers because the public sector cannot pull itself up by its own bootstraps.
"You sound like you are stranded in a naive Cityboy coccoon and incapable of acknowledging the flaws of the system you are a part of, and the damage it has inflicted upon the rest of us in recent times."
On the contrary, I have an objective and analytical training which tells me that whilst there are flaws in the system, some of them have been corrected. I would also point out that many people in the City have nothing to do with any of these issues. I won't give away my identity but my work is exclusively on raising finance for industry with a little M&A work from time to time. Nothing to do with sub-prime mortgages, securitisation, credit default swaps or exotic derivatives although I would claim to know all of the issues. But I am no more part of "the system" than you are.
Overpaid NHS Manager said...
"...by and large the management responsible for creating the problems at RBS and HBOS have gone"
"Yes, but they were recognised and promoted as being the cream of the crop so how likely is it that their successors will be any less likely to screw up to a similar degree?"
As I pointed out in an earlier post, neither Goodwin at RBS or Crosby at HBOS were what I would call true bankers, and the results were clear. There was a lot to be said for the Glass Steagall Act in the United States that kept investment banks and their traders away from commercial and retail bank depositors money. I would be in favour of brining it back in the US and doing something similar here.
Goodwin has been replaced by Stephen Hester, a well known banker, and he has hired a good hire from ANZ in Australia.
When you get home from your day job spend some time and read this:
http://alexmasterley.blogspot.com/2009/02/good-riddance-to-goodwin.html
I don't really see what this has to do with destroying this country's internationa competitiveness, but I am happy to fill in the gaps in your knowledge base.
Anonymous said...
"An alternative design for a national and international banking system exists. It could be built far more cheaply and quickly than you would like to think and can operate entirely independently of you and your ilk."
The all I can say is go for it. I am always in favour of workable innovation. If you have something that makes sense I will be the last person to stand in your way, but at the moment all I am hearing is anonymous bile.
Good. More equal societies are happier societies. Perhaps this development will halt the brain drain of talented science graduates into the city, and incentivise the current crop of overworked rats to spend more quality time with their mates and their families.
DirtyButClean wrote: "More equal societies are happier societies."
I take it you are talking about Russia 1917 - 89 or perhaps post War Eastern Europe, no, let's go for really egalitarian societies, Pol Pot's Cambodia and Kim Il Sung's North Korea.
I was in Berlin on reunification night, and in Poland for a couple of years in the early 90s, and believe me, there wasn't a single person who thought that the improvement was beyond belief.
"Equality" requires massive repression, surveillance, and usually a good measure of arbitrary violence. Always. Everywhere.
I have no doubt you will wheel out Sweden. However, the comparison of a huge empty country with 9 million people with the 4 billion under the Chinese, Soviet, Eastern European can be dismissed as nothing but an anomaly. Not too many people would bet on being in the one-twentieth of one percent who wound up in a decent "egalitarian" society compared with the 99.95 percent who wound up in totalitarian egalitarian horror.
"DirtyButClean said...
Good. More equal societies are happier societies."
You reckon. I live deep in the countryside where hedge fund managers live on vast estates next to smallholders living from hand to mouth, and both are happy in their own way. Neither would swap it for Stalinism.
"Perhaps this development will halt the brain drain of talented science graduates into the city, and incentivise the current crop of overworked rats to spend more quality time with their mates and their families."
They are more likely to emigrate as many Brits did in the 70's and 80's, as I did on graduating in a scientific subject from Cambridge in 1980, coming back to London 7 years later. People who want to work hard will always follow the opportunities, and leave if the system holds them back. Just look at the number of French people who came to London during the last French socialist government.
Some of the comments here beggar belief.
The point is that having huge taxes on high-earners actually reduces tax receipts - whether it's because people find ways to avoid tax, move abroad (taking even more money - and hence jobs - with them) or put less effort into work.
With a £175bn - optimistic - projected annual deficit, that's money we can ill afford to lose.
And yes, some of the excesses in the City have contributed to perhaps - in the end - £100bn of costs. But the problem here was people rationally taking advantage of a crap regulatory system - both on the part of Government (responsibility: G Brown) and private sector shareholders (including anyone that has a private pension - although better regulation here might help). And, therefore, in the end, the muppets that voted Labour.
And, yes, I work in the public sector. I don't give a s*** what other people earn in private companies (and, of course, outside London and the SE, public sector employees earn more than their private sector counterparts) - I'm not a jealous person. But what does p*** me off is crap people in the public sector earning vast salaries despite being useless - and a lot of senior managers fall into that category, including those at the Treasury responsible for both losing control of public spending (because they wouldn't stand up to McMental) and financial regulation (because they are generally stupid) - I should know, believe me! :-) And a lot of the more junior people - even though they aren't well-paid - simply wouldn't get jobs in the private sector: the public sector has become a form of welfare for imbeciles. Just try phoning government beenfit offices if you don't believe me!
Jesus wept!
@Alex - It is the Scandinavian model- not Stalinism - that is the yardstick for an egalitarian society.
The Scandinavian societies are by pretty much any measure of polling, happier than we are, and I personally think that's what it's all about. I would gladly wave goodbye to the greedier elements of our society (and the subsidy they provide the rest of us) in exchange for an improvement in our collective mental health.
DirtyButClean said...
"@Alex - It is the Scandinavian model- not Stalinism - that is the yardstick for an egalitarian society."
I know several "egalitarian" Scandinavians living in London and the Home Counties who still control businesses in Scandinavia. Despite a lack of relative poverty in Sweden and Norway (Denmark is a different matter), Sweden is hardly egalitarian with large swathes of the economy controlled by the likes of the Wallenbergs, Rausings, Kamprads etc, while Norway derives all of its income from oil and gas and needs little true entrepreneurship.
So what? - egalitarianism is not an all or nothing struggle.
Happiest countries in recent rankings:
01. Denmark
02. Switzerland
03. Austria
04. Iceland
05. Bahamas
06. Finland
07. Sweden
08. Bhutan
09. Brunei Darussalam
10. Canada
Don't know for sure about the smaller ones - the rest certainly have Gini coefficients of less than 0.34 (most less than 0.3)
Richard Layard puts it well when he writes:
‘There is a paradox at the heart of our lives. Most people want more income and strive for it. Yet as Western societies have got richer, their people have become no happier.'
N.B. Oil/gas accounted for only 23% of Norway's GDP in 2007. It is quite clearly not a monopolar economy as you suggest.
"01. Denmark
02. Switzerland
03. Austria
04. Iceland
05. Bahamas"
Fair mix of low tax countries in that top 5. All of the Danes I have ever met have either been depressed, crooked or heavily into personal tax avoidance.
"N.B. Oil/gas accounted for only 23% of Norway's GDP in 2007. It is quite clearly not a monopolar economy as you suggest."
On the contrary, when you consider that in a typical producer country50% of the value goes in production taxes, which then gets recirculated as salaries for public sector workers which get recycled as income for retail businesses etc, it is clear that oil and gas dominates the country. A 23% share would be a dominant industry anywhere.
Have you ever heard of Norwegian made cars, electronics, flowers, vegetables, pharmaceuticals, glass, steel or precsion machine tools? Neither have I.
Bishop Brennan said...
"Some of the comments here beggar belief."
I concur your Grace. What most of the posters fail to grasp is that many of the high earners in the City (i) are foreigners, typically European and American, and (ii)make money for their firms out of international rather than UK business. They are highly mobile and since their place of work is simply a desk in an office or trading floor, it doesn't cost mch to move that business to another part of the world.
The only benefits that the City has is easy face to face interaction with other bankers, traders, lawyers etc, a factor which is becoming less important with high speed telecomms and a high concentration of specialised talent, but that talent pool can be moved elsewhere if the banks decide it is worth their while to do so.
Post a Comment