A global tax on bankers' bonuses? France, U.K. say 'Oui, indeed'
French President Nicolas Sarkozy and British Prime Minister Gordon Brown co-wrote an opinion piece in Thursday's Wall Street Journal calling for governments worldwide to collaborate on regulations designed to rein in runaway banks. That would include a global tax on financial employees' bonuses.
"We agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system," Brown and Sarkozy wrote.
The editorial appears just as France reportedly moved to follow Britain's lead and impose a hefty levy on bankers' compensation. The French business newspaper Les Echos reported Thursday that Sarkozy's government was weighing a 50% tax on bonuses above about $40,000, according to Reuters.
Alistair Darling, the British chancellor of the exchequer and Brown's chief financial official, riled London bankers on Monday by announcing a similar tax. The one-time move was designed to impose a "permanent culture shift" on financial workers by forcing them to "start living in the real world," The Guardian, a London newspaper, quoted Darling as saying.
U.K. bankers were predictably displeased with the proposal. Robert Diamond, president of Barclays PLC (BCS), Britain's second-biggest bank, said a tax on bonuses could cause a "race to the bottom" that would put London at a disadvantage to New York in the competition among world financial centers to attract talent and capital.
What the U.K. and France are considering differs from the approach that's been taken here in the U.S. The Obama's administration "pay czar," Kenneth Feinberg, has the authority to review compensation at companies that were propped up through massive infusions of public money. But he can't levy a tax on all bankers' bonuses.
What's more, Brown and Sarkozy said, any plan to tax bonuses would have to be international in scope. And the U.S. is still king when it comes to finance. "It is clear the action that must be taken must be at a global level. No one territory can be expected to or be able to act on its own," they wrote.
Despite the low esteem in which Americans hold bankers, they probably dislike taxes even more. That may complicate any effort to make a bonus tax truly global.