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Credit Suisse says UK banker bonus tax was ‘strikingly unfair’
[LONDON] Credit Suisse Group attacked a British tax on banker bonuses in the wake of the 2008 financial crisis as "arbitrary and discriminatory" on the first day of a trial where it's seeking to reclaim hundreds of millions of pounds.
The Swiss lender is suing the UK government over the one-time 50 per cent tax, which applied to bonuses over £25,000 (S$43,218) that were paid almost a decade ago, when anger about banker pay was at its height.
The tax was "strikingly unfair" because it "penalised us and gave certain competitors a leg up," the bank's lawyer, Aidan Robertson, said in court on Tuesday.
George Peretz, a lawyer for the UK tax office, said the levy was introduced at a time when "the risks of high bankers' bonuses were well known." Bankers would "receive very large bonuses if their bets came off and if their bets didn't come off there was no downside," he said. Banker bonuses were a "major policy concern" in the wake of the crisis, he said.
The trial, scheduled to last three days, may throw fresh light on events at the height of the financial crisis and could potentially force the government into a costly tax refund. Credit Suisse and HMRC declined to immediately comment.
Credit Suisse says the levy - introduced by the Labour government - was unfair because it only applied to bonuses paid between Dec 9, 2009, and April 5, 2010. That meant some banks didn't have to pay it on some or all bonuses that were distributed outside the time period.
Fifteen banks with calendar year-ends paid "significant" amounts, but 16 banks with non-calendar year-ends paid "very little", Credit Suisse said. The "discriminatory and unequal impact" of the tax "lies at the heart of" the bank's case, it said.
Banks including NM Rothschild Banking, Nomura Bank International and Royal Bank of Canada paid "significantly less" than Credit Suisse because they paid bonuses outside the time period, the bank said in court filings.
The government had "made an assumption that all bank bonuses would be awarded in the bonus season commencing in December or January," the document said. "That assumption turned out to be wrong and should at the time have been known at the time to be wrong."
The reason other banks paid little or no money under the levy could be that they didn't pay bonuses at all, Mr Peretz said.
Officials decided not to extend the bonus tax beyond April 2010 because "if the tax began to look permanent that might harm the UK's international competitiveness," the tax authority said in its filings. The government introduced the levy because it had given banks "enormous and unprecedented" amounts of public money in the wake of the crisis and it wanted to stop that being used for "excessive bonuses," it said.
The tax generated £3.4 billion, almost five times higher than initial estimates. Credit Suisse cut its global bonus pool by 5 per cent to help fund the cost.