What is a Banker?

9th Dec '09 by Stockhound

13 comments 8281 reads

In response to Darling's talk of taxing banker's bonuses ( http://www.guardian.co.uk/uk/2009/dec/07/alistair-darling-shock-tax-bankers ), I thought it would be good to start a discussion on the rather philosophic question of 'what is a banker'?

What is the difference between a statistical arbitrage desk within Barclays Capital and a hedge fund that does the same thing?

Will this tax mean that hedge funds get taxed similarly to banks? Hedge funds have been getting into the lending game for many years. Lots of people believe they are acting like banks...

What is a bank? When is a bank a bank? When is a bank not a bank? Would love to hear what everyone thinks on this matter. Where should the tax stop? In my opinion it's not enforceable at all due to the whole semantic war that will ensue.

From my dictionary...

banker |?ba ng k?r|
noun
an officer or owner of a bank or group of banks.
• the person running the table, controlling play, or acting as dealer in some gambling or board games.
ORIGIN mid 16th cent.: from French banquier, from banque (see bank 2 ).

Unlock with Email

Unlock with Google

Already have an account?
Login here

doverbeach

9th Dec '09

There won't be any semantic war. The answer is that a bank in the UK is an entity that requires a banking license. If you are unsure whether your start-up is or is not a bank, your lawyers will be more than happy to advise :)

db

djpreston

In reply to doverbeach (post #1)

The rumours seem to be that the definition will be "Any FSA registered Firm". That will also hit the asset managers etc.

Bugger. Thats me as well.

One day Gordo, one day..... when you least expect it and Im back in the hometown.....

Stockhound

No worries there for me db... I'm in the clear.

djp - 'any FSA registered firm' - where did you pick up that rumour? That will hit advisers too... it's ridiculous. It's definitely discriminatory on specific occupations. Legal minefield, absolutely no way they can get away with it.

In reply to StockHound (post #3)

Just seen it in numourous leaks.

The rationale for that catchall seems to be that they cant define "banker" and tax them specifically as otherwise that would run into a sure fired Human Rights case.

Agree that a description like that would hit a lot of "innocents" as Collateral damage. Then again, since when has Gordo ever thought things through, especially when making up tax policy on the fly and shooting from the hip? (10% tax credit etc).

I guess the obvious loophole will be to make back dated basic salary increases which then revert in a year.

Still, we will find out soon enough.....

Cue Darling............

In reply to djpreston (post #4)

In a way you have to feel sorry for Darling. Dropped right in the shinola by his glorious leader

What am I thinking? Feel sorry. Myarse..

Here is the official rules from HMRC - Page 6

http://www.hmrc.gov.uk/pbr2009/bank-pay-tech-note.pdf

Bstard - basically everyone then.

text from a friend working at Goldman Sachs, when asked how the news is going down: "There is a lot of mental arithmetic going on"

db

In reply to doverbeach (post #7)

As ever - FT Alphaville:

http://ftalphaville.ft.com/blog/2009/12/09/88006/are-you-a-banker/

Betasurfer

The wider application turns on these two definitions:

“Investment company” etc 23 (1) “Investment company”- (a) means a company whose business consists wholly or mainly of, and the principal part of whose income is derived from, the making of investments, and (b) also includes any savings bank or other bank for savings. (2) “UK resident investment company” means an investment company that is resident in the United Kingdom.

That wouldn't include a hedge fund or PE fund because of part (2)

“Financial trading company” etc 24 (1) “Financial trading company” means a company that- (a) is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act), or (b) is not within paragraph (a) but carries on a trade consisting wholly or partly in dealing in securities. (2) “UK financial trading company” means a financial trading company that is resident in the United Kingdom. (3) A “relevant foreign financial trading company” means a company that meets the following two conditions. (4) The first condition is that the company- (a) is not resident in the United Kingdom, and (b) carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom. (5) The second condition is that, disregarding any activities of the company other than those carried out through that permanent establishment, the company is a financial trading company. (6) In this paragraph “securities” includes- (a) shares, (b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of that Act, and (c) in the case of a company with no share capital, interests in the company possessed by members of the company.

Hmmm.... That looks like it would.

fuiseog

A banker is one of the few remaining entities from which tax can be levied while electoral support can be gained

-:)

fuiseog (not a banker)

StrollingMolby

In reply to djpreston (post #6)

Darron,

We had the same heart-stopping moment too, but the definition of a "Taxable company" for the purposes of the bank payroll tax is:

• a bank;

• a UK resident investment company or UK resident financial trading company in a banking group;

• a building society;

• a UK resident investment company or UK resident financial trading company in a building society group; and

• a UK branch of a foreign bank or the UK branch of a foreign financial trading company in a banking group.

So unless you are a subsidiary of a bank/building society, the bank payroll tax is not coming your way.

10th Dec '09

And now the French are going to follow suit... Interesting.

France on Thursday said it would follow Britain’s lead in levying a supertax on bankers’ bonuses giving added momentum to global efforts to curb high levels of financial sector pay.

One French government official said a bonus tax had been under consideration for some time but that President Nicolas Sarkozy had feared it could damage Paris as a financial centre. “The fact that London has introduced it has changed the landscape,” the official said.

Is it just me that find the Goldman Sachs gesture rather feeble? Just the top 30 executives, all of whom have more money than they could spend in a lifetime....

http://www.ft.com/cms/s/0/1ba50b30-e5b6-11de-b5d7-00144feab49a.html

emptyend

11th Dec '09

All quite interesting stuff - and I'm quite glad to be nowhere near the tax net on this one myself!

I was tempted to wonder why they had gone the route of setting up a complex payroll tax instead of a straight windfall tax on bank profits.......and then I remembered that:

a) we are dealing with Gordon Brown - a man who routinely prefers to obfuscate by making things unnecessarily complex (eg the bank non-regulatory system that caused the problem in the first place) and

b) the possibility of leaving loopholes for the smart folks at Goldman, hedge funds etc will probably keep several hundred people in employment whilst they rootle around through all the alternative avoidance practices that have been employed over the last 20 years

I imagine that there will be plenty of advisory work for legal experts on redomiciling.....

What is a Banker?

Unlock the rest of this article with a 14 day trial

About the Author

Stockhound

13 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...