US banks disclose UK bonus tax costs

Source: Reuters

8 May 2010, 0621 hrs IST,REUTERS

CHARLOTTE: A British tax meant to curb banker bonuses earlier this year will cost three of the biggest US banks roughly $1.4 billion. Bank of America Corp, the largest American consumer bank, expects a $465 million compensation and benefits charge from the UK tax on its British bonus payments, the bank said in a first-quarter report filed on Friday with US securities regulators.

Late on Friday, Citigroup Inc also disclosed in its quarterly filing a roughly $400 million charge for the bonus tax in second quarter. Goldman Sachs Group Inc expects to pay more than $600 million for the UK tax, according to accounts filed last week by its London arm, Goldman Sachs International.

The so-called UK banker bonus tax, announced in December, assesses a 50 percent charge on bonuses above 25,000 pounds ($40,250) paid between Dec 9, 2009, and April 5, 2010. Since the tax was announced, estimates indicate top global banks may pay more than 2 billion pounds ($2.9 billion) in total for bonus payments. UK banks took charges for the tax in their 2009 accounts, but most European and US banks will account for the tax in their 2010 accounts, as the tax was not fully enacted until this year.

JPMorgan Chase & Co and Morgan Stanley have yet to disclose the impact of the UK levy on its upcoming second quarter earnings. Morgan Stanley, in its first quarter report, said it is still evaluating the impact and will record a charge in the second quarter.

Read more: http://economictimes.indiatimes.com/news/international-business/US-banks-disclose-UK-bonus-tax-costs/articleshow/5905502.cms

We need the money, and its obvious the banks would rather pay a tax than reduce bonuses.