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Banking industry

Goldman Sachs Defers UK Bonus Payments Amid Tax Dispute

Strategic Insights

— 1 min read

Goldman Sachs Group Inc. (NYSE: GS) has reportedly deferred announcing the structure and magnitude of bonus payments worth more than $20 billion to its 32,000 employees in the UK, citing concerns over the new 50% super-tax on bonuses exceeding $25,000. The decision comes after the British government declared the tax on banks in an effort to gain control over multimillion-pound bonus payouts by banks that have been bailed out with taxpayer cash. The new tax law is causing a stir among non-British banks operating in the UK, including JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), and Morgan Stanley (NYSE: MS).

Key Takeaways:

  • Goldman Sachs has deferred announcing its bonus payments, citing concerns over the new 50% super-tax on bonuses in the UK.
  • The tax law, introduced on December 9, 2009, aims to control multimillion-pound bonus payouts by banks bailed out with taxpayer cash.
  • Non-British banks operating in the UK, including JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), and Morgan Stanley (NYSE: MS), are also affected by the tax law.
  • Goldman Sachs had reportedly warned the UK Treasury that it may move 20% of its London personnel to Spain as a result of the issue.
  • The company has ample leverage in the UK, having paid more than $2 billion to the Exchequer's ailing reserves in corporation tax alone in fiscal 2008.
  • Goldman Sachs condemned the government for not providing a predictable tax environment and has appealed to take back or amend the new tax laws.

Statistics:

  • Goldman Sachs sets aside 45% of its revenues for staff compensation.
  • The company's staff compensation is expected to rise by 81% in fiscal 2009 compared to 2008.
  • The new 50% super-tax on bonuses exceeding $25,000 is set to generate a significant amount of revenue for the UK Treasury.
  • Goldman Sachs has 32,000 employees in the UK, who are expected to receive bonus payments worth more than $20 billion.

Sources:

  • Zacks.com
  • Goldman Sachs Group Inc. (NYSE: GS)
  • JPMorgan Chase & Co. (NYSE: JPM)
  • Citigroup Inc. (NYSE: C)
  • Bank of America Corp. (NYSE: BAC)
  • Morgan Stanley (NYSE: MS)
  • The Daily Telegraph
  • UK Treasury

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