European leaders applaud British bank bonus tax
European leaders ganged up Thursday against a favourite target — fat bonuses to bailed-out bankers.
British Prime Minister Gordon Brown and French President Nicolas Sarkozy agreed it was a good idea to slap higher taxes on performance pay, especially considering they are back on the rise soon after last year's financial meltdown that led to taxpayer-funded bailouts in some cases.
"We agree that a one-off tax in relation to bonuses should be considered a priority," the two wrote in an editorial in the Wall Street Journal.
Brown's government on Wednesday said it would impose a one-time 50 per cent tax on 2009 bonuses above $40,800. He also wrote a letter to his 26 fellow EU leaders at a summit opening Thursday, urging them to take quick action on climbing bank bonuses.
"Again now, banks have made very large profits, and some of their employees have received bonuses equal to many multiples of average earnings," he wrote.
"While the benefits of success are reaped by the few, the costs of failure are borne by the many. We must therefore act," he wrote.
German Chancellor Angela Merkel did not wait for the summit to start to throw the weight of the EU's economic powerhouse behind the idea.
She described Britain's tax as an "attractive idea" that might encourage some lessons to be learned in London's financial district.
"We have always repeatedly said, from the German point of view, that we want banks and their businesses to pay a share, that the burdens of the crises could be shared and not loaded on to taxpayers alone," she said at a meeting of European centre-right leaders in Bonn, Germany.
In Canada, a published report Thursday said Canadian bankers are set to receive bigger bonuses this year as their colleagues around the world face a political uproar over what many consider lavish pay for poor performance.
An analysis by the Globe and Mail shows bonuses at Canada's six biggest banks will reach a record $8.3-billion for fiscal 2009.
That would be an increase of 18 per cent from last year, and about four per cent higher than 2007.
French Presidential spokesman Franck Louvrier wouldn't confirm published reports that France had decided to follow Britain with a 50 per cent bonus tax, saying only that no decision had been made.
European Commission President Jose Manuel Barroso also warned that "we cannot have a simple return to business as usual and that would apply to the bonuses," his spokeswoman Pia Ahrenkilde Hansen said.
Attempts to impose similar bonus taxes in the United States have faltered in the Congress. The House of Representatives voted in March to impose a 90 per cent bonus tax at companies that received at least $5 billion in federal bailout money, but a similar effort in the Senate to pass a smaller 70 per cent tax covering a wider range of companies faltered.