London Bank considers relocating staff to Spain

 

Bankers Goldman Sachs has told the UK Treasury that it is considering relocating up to 20 per cent of its London-based staff to Spain in a protest over recent issues concerning industry taxes and bonuses.

The investment bank paid in excess of£2bn – the largest contributor of taxes from the financial sector - to the UK Treasury in corporation tax alone during 2009 and has challenged the Government as a response to the tax measures unveiled by the Chancellor in the pre-Budget speech a few weeks ago.

In addition to these corporation taxes, Goldman Sachs employees in the UK are estimated to have paid more than £1bn in personal taxes, so any such relocation of Employees could have a serious impact with the Treasury.

An unnamed source in the City stated: "Goldman's could move a relatively large number of people if it wants to. Given how much Goldman and its staff contribute to the tax take, the firm has plenty of leverage. This is a bargaining position more than anything."

The bank is believed to have strong links to the Spanish government, although it has far fewer employees in Spain than in the UK. Although relocating staff to Spain would not receive any special tax incentives, the bank could avoid paying the bonus tax in the UK however at this stage. At the moment the Treasury has not said when these measures will take effect, how, or at what rate they will be taxed and as such it is thought that Goldman's are merely preparing for a negotiation.

London-based Broker, Tullett Prebon, has already stated how it was offering employees the opportunity to relocate, in order to avoid paying the super tax. But it is thought that the offer only relates to a portion of its 700-strong London staff.

Barclays' chief executive, John Varley, entered the debate on Friday, warning that talent was likely to flee London because of the tax. "This is a global industry and talent is mobile. We need a level playing field to make sure that we can compete with the best companies in the world," he said.

The Bank of England also added an opinion stating how the bailout of Britain's banks could have been avoided had City bonuses been just one fifth less in the years running up to the crisis. In its Financial Stability Report, the Bank said: "If discretionary distributions had been 20 per cent lower per year between 2000 and 2008, banks would have generated around £75bn of additional capital – more than provided by the public sector during the crisis."

meanwhile, firms continue to negotiate with the Treasury over details of the super tax, which will see bonuses of £25,000 taxed at 50%. It is believed that independent stockbrokers will be spared, after initially being deemed subject to the tax.