Taxing times

19 October 2009 By Hugo Dixon Follow @hugodixon

The industry has enjoyed a windfall on the back of taxpayer support and is now proving extraordinarily insensitive in pushing ahead with plans for megabonuses. A windfall tax is normally a bad idea. But unless the banks rapidly get onmessage, it will be unavoidable.

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The UK government is likely to impose either a special tax on bankers' bonuses or a windfall tax on banks' profits, according to a person familiar with the government's thinking. The Sunday Telegraph also reported that the UK government was planning a windfall tax on banks.

Meanwhile, Boris Johnson, the Conservative Mayor of London who has hitherto been one of the strongest supporters of London's bankers, wrote in the Daily Telegraph that the time to avert a windfall tax was running out fast. George Osborne, the Conservatives' shadow chancellor, hinted earlier this month that he too was considering a windfall tax.

In the US, several prominent Democrats have also denounced bankers' bonuses in recent days. Rahm Emanuel, the White House chief of staff, said Americans had the right to be frustrated and angry at reports that Wall Street was poised to hand out another round of big bonuses. Christopher Dodd, chairman of the Senate Banking Committee, described the bonuses as an outrage.

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