Goldman Sachs warns UK Treasury it may transfer 20% of its 5,000 London staff to Spain in protest over UK tax and bonuses
Goldman Sachs (GS) has threatened the UK Treasury with plans to move up to 20 per cent of its London-based staff to Spain in a standoff over tax and bonuses.
It's believed that the Wall Street investment bank, which paid more than £2bn to the Exchequer's ailing coffers in corporation tax alone last year, has fired a warning shot across the Government's bows in response to the tax measures unveiled in the pre-Budget report earlier this month.
Goldman Sachs International was the biggest contributor from the financial services sector to Britain's purse last year. Previous reports suggest that in some years the firm's staff have contributed more than £1bn in personal income tax to public coffers.
A City source said: "Goldman 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, which employs around 5,000 staff in London, is believed to have strong links to the Spanish government, although it has a relatively modest number of employees in the country. Although staff moving to Spain would not receive any special tax incentives, the bank could avoid paying the bonus tax, details of which, so far, remain sketchy. A Goldman Sachs spokesman said it is looking at all options as it negotiates with the tax authorities over the bonus tax.
Tullett Prebon, a City money broker, said last week that it was offering its staff the chance to relocate, in an effort 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' (BCS) chief executive, John Varley, waded into the bonus 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 added fuel to the bonus fire last week when it said that the bailout of Britain's banks might 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 Her Majesty's Revenue over details of the super tax, which will tax bonuses of £25,000 at 50 per cent. It is believed that independent stockbrokers will be spared, after initially being caught in the Chancellor's net.