Today's top stories from Report on Business :
Merry Christmas, we cut your bonus
Britain's Labour government outraged the country's bankers today by unveiling a one-off, so-called supertax on bank bonuses. The government, lagging in the opinion polls as it heads into an election within six months, said in a pre-budget report that, until April, banks will pay a 50-per-cent tax on bonuses above £25,000. To be sure, there were other measures in Finance Minister Alistair Darling's report, including a higher projection for government borrowing, but it was the bonus tax that got the attention. It's worth noting, though, that the updated debt forecast comes at a time when markets are paying close attention to sovereign credit issues in the wake of troubles in countries such as Greece and Dubai and warnings from ratings agencies about mounting debts.
While the cost is to the banks, it certainly will make them think twice about the size of bonuses. Mr. Darling said some banks still think hefty bonuses are still the priority, despite government bailouts, and "if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer."
The reaction was fierce, with criticism that Labour is playing to the masses, electioneering, discriminating, and taking steps that could hurt London's renowned banking sector.
"Viewed from abroad, those foreign banks which reward their U.K. staff with contractually-agreed bonuses are likely to be the hardest hit," said Angela Knight, Chief Executive of the British Bankers' Association. "London may well look to them now like a significantly less attractive place to build a business."
Almost unnoticed in the fury over bank bonuses was the fact that Mr. Darling cut taxes to bingo operators.
Reaction: 'Hit 'em where it hurts'
Streetwise: Canadian banks in London to pay price
Bingo and beer
There must be something in the air today about taxes. Besides the bonus tax, Mr. Darling, the Chancellor of the Exchequer, cut the tax on bingo operators to 20 per cent from 22 per cent, responding to complaints that they'd been hit in the April budget. "Clearly that is a popular measure," Mr. Darling said.
And while it's not bingo, Ireland also offered some new measures to the populace. Trying to stop shoppers from buying alcohol cheaper in Northern Ireland, Dublin said today it would cut alcohol taxes, effectively reducing a pint of beer by 12 cents, a glass of liquor by 14 cents and a bottle of wine by 60 cents, Bloomberg News reports. Shoppers had been going north to take advantage of lower taxes and currency fluctuation, the industry complained.
Elsewhere, Lithuania's parliament approve measures to cut corporate taxes, while Britain, besides the other measures, said it would relax tax-related rules governing development of oil and natural gas fields in the North Sea, and China said it would slap a sales tax on houses flipped within five years of purchase, trying to clamp down on real estate speculators.
Sovereign debt fears continue to weigh
Fears of sovereign credit risk continued to ripple through financial markets today, although stocks climbed back. There have been fears related to Dubai, Greece and, today, Spain, whose outlook was lowered by Standard & Poor's to negative because of its economic growth outlook. On Tuesday, a downgrade by Fitch of Greece's ratings spooked investors, while Moody's warned the United States and Britain to get their fiscal houses in order or "test" their triple-A ratings. Greece's Prime Minister George Papandreou said at a cabinet meeting, which was broadcast on TV, that his government "will do everything necessary to control the giant deficit. That is the only way Greece will not be in danger of losing sovereign rights."
Related : Debt alarm over stimulus spending
Rosenberg on the markets