Britain, France urge tax on bankers' bonuses

11th December 2009, Comments 0 comments

Britain and France urged world leaders to impose a tax on bankers' bonuses, a day after London announced a one-off levy on the much-criticised finance sector benefits.

LONDON - Seeking to show a united front days after a public Anglo-French spat over financial regulation, Prime Minister Gordon Brown and President Nicolas Sarkozy said there was an "urgent need" for a new agreement between banks and society.

"We propose a long term global compact that will encapsulate both the responsibilities of the banking system and the risk they pose to the economy as a whole," they wrote in the Wall Street Journal newspaper.

"We agree that a one-off tax in relation to bonuses should be considered a priority due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system."

Britain announced Wednesday it was slapping a one-off 50-percent tax rate on bonuses above 25,000 pounds (27,600 euros, 40,700 dollars) to recoup cash spent saving the financial sector during the crisis.

The move, has been seen by some British commentators as a populist domestic measure, with a general election due by June and Brown's governing centre-left Labour Party consistently behind in opinion polls.

Brown spent a decade as Britain's finance minister before taking over from prime minister Tony Blair in June 2007 and had openly courted London's City district, Europe's financial hub.

Labour was "intensely relaxed about people getting filthy rich, as long as they pay their taxes", according to Peter Mandelson -- Brown's de facto deputy and Sarkozy's bete noire during his time as the EU trade commissioner.

But the global meltdown of the last 18 months has hit London harder than most, and Britain is still struggling to emerge from recession, unlike most of its European partners.

The Brown-Sarkozy article comes ahead of an EU summit in Brussels starting later Thursday, and appeared designed to counter suggestions of a simmering row between the two countries over EU financial reform.

Both countries have traded barbs since former French minister Michel Barbier was appointed EU commissioner in charge of financial services, with Sarkozy saying Britain "were the big losers" in the carve-up of new EU jobs.

Barnier's appointment sparked outrage among British officials, who fear he is too anti-free market and could pose a serious threat to the City of London as a major financial hub.

Brown and Sarkozy then scrapped a planned meeting in London last week, prompting talk of a row over the appointments and the French leader's remarks.

France also denied Tuesday it had snubbed Britain by not inviting its agriculture minister to Paris talks on the future of Europe's farm subsidies.

The move has been portrayed in the British press as a slap in the face for Brown's government.

In their newspaper article, the French and British leaders said coordinated regulation was needed globally to reduce risks to taxpayers forced to foot the bill from the crisis.

"Better regulation and supervision are the means by which the risk to the taxpayer can be reduced for the longer term."

Brown and Sarkozy were due to hold bilateral talks in Brussels ahead of Thursday's EU summit later in the day. Officially they were to discuss climate change and Europe's economic recovery.

However, it is also an attempt to ease signs of a Franco-British rift. The bilateral talks were "not specifically focused on any one issue. There are lots of things going on," said a Brown spokesman.


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