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The Memory Span of Goldfish

In the current bonus bashing frenzy it might be interesting to pause and look back at:

Article from:The Independent (London, England) Article date:November 29, 2001 Author:Chris Hughes Financial Editor

"THE FORECAST collapse in City bonuses which the Government used to justify raising public borrowing requirements in Tuesday's pre- Budget report is unlikely to be as severe as the Chancellor predicted, economists said yesterday.

Radical revisions to assumptions about tax revenues from the financial services industry, in the form of both corporation tax and income tax on employees' annual bonuses, were the principal driver behind Gordon Brown's warning that the Government was anticipating a sharp drop in tax revenue next year. The impact of lower City bonuses alone was estimated at as much as pounds 1bn, while the weakness in equity markets was expected to have a negative effect into 2003."

Or this from 2005

"Projections for tax collection this year are still based on a forecast for economic growth of 3 to 3.5 per cent. The boom in corporate profits means that despite the shortfall on growth, corporation tax will still come in higher than expected. Sky-high oil prices and another record bonus season in the City should help too."

Or this from 2008

"The Treasury also expects to generate less cash from City bonuses, anticipating that income tax receipts will increase at a slower rate than wage inflation in the coming year."
and concluding with
"The pain inflicted by the Chancellor consisted of £1.7bn in environmental taxes, mainly on cars, £600m from drinkers and £500m from closing tax loopholes. However, while these indirect taxes will increase this year, direct taxes such as income tax will fall for some families as a result of last Budget's measures."

Yes, that's right, if they don't get to tax the bonuses (because they aren't paid) then they have to make up the tax revenue off of you, me, etc.

And even the Daily Mail as recently as August of this year:

"The prospect of soaring profits and bonuses at the U.S. firm could present the government with a serious dilemma. Chancellor Alistair Darling has been talking tough on eradicating profligate pay and excessive risk taking in the Square Mile.
But with borrowing set to exceed the £175billion level predicted in the April budget, Darling can ill afford to alienate one his biggest and most reliable payers. The government has come to rely on huge windfall gains from banks and oil companies over recent years."

Quite the conundrum. Not that I think the way that world economics runs right now is fair or just or good, I don't. But it is the economy we have. Are the people who work in banking heros paying the taxes that fund the country or villains who are stealing our money? The answer, it appears, is

Oh, look a castle!


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