bonus fallacy

Bazn

the latest bizzare claim is that falling bonuses are depriving the govt of tax revenue. this was actually raised in the media coverage of RBS and lloyds TSB bonuses, saying that we should let them pay bonuses so we can collect the tax.

doesn't anyone realise the huge flaw in this argument?

for example, the govt owns (at least) 70% of RBS.

so for every £1000 of bonus paid out by the company, in theory the taxpayer stumps up £700 of that.

now they tax it at 40%. woohoo, thats £400 extra tax revenue.

but hang on - didn't we pay out £700, so actually the taxpayer makes a loss of £300 on that £1000 bonus?

anyone else angered by the sheer stupidity of it all?

adambro

The government hasn't just thrown money at the banks, they've bought shares which ultimately they will almost certainly be able to sell at a nice profit for the tax payer. Whilst the government can have some say over the bonuses paid at those banks we own shares in, it wouldn't be in our interests to not pay bonuses if the bank down the road where the Treasury can't have a say can continue to do so and so encourage people to quit and move jobs.

It is in our interests to have the best people running these banks now and if part of their remuneration package includes bonuses to compete with the other banks then so be it.

Your assertion that the argument that not paying bonuses reduce tax revenues is incorrect is itself wrong. The Treasury hasn't given money to the banks, they've effectively loaned them it. It will be paid back back with a significant profit on top so for the banks to pay out some of this money to stop the best people disappearing off to the bank next door whilst a significant amount comes straight back to the Treasury seems a pretty good deal.

The taxpayer isn't making a loss on any bonuses paid.

CLAPTON

adambro wrote: »

The government hasn't just thrown money at the banks, they've bought shares which ultimately they will almost certainly be able to sell at a nice profit for the tax payer. Whilst the government can have some say over the bonuses paid at those banks we own shares in, it wouldn't be in our interests to not pay bonuses if the bank down the road where the Treasury can't have a say can continue to do so and so encourage people to quit and move jobs.

It is in our interests to have the best people running these banks now and if part of their remuneration package includes bonuses to compete with the other banks then so be it.

Your assertion that the argument that not paying bonuses reduce tax revenues is incorrect is itself wrong. The Treasury hasn't given money to the banks, they've effectively loaned them it. It will be paid back back with a significant profit on top so for the banks to pay out some of this money to stop the best people disappearing off to the bank next door whilst a significant amount comes straight back to the Treasury seems a pretty good deal.

The taxpayer isn't making a loss on any bonuses paid.

amazing
the government has bought shares in banks and will sell at a profit... so why didn't all those private buyers go and buy those shares knowing they would be making a big profit (isn't that what capitalism is all about?).

Where exactly are those highly paid bankers going to get a job in the bank down the road?.. Lots of banks have completely withdrawn from the UK..(Icelandic and USA banks) and Lloyds and Barclays and HSBC are all cutting jobs... what exactly is left?

Inactive

adambro wrote: »

The taxpayer isn't making a loss on any bonuses paid.

Taxpayers are totally sick at the very thought of it, it disgusts me that any banker should get a penny in bonus in the present economic climate that itself has in the main been caused by greedy bankers.

They should all be getting pay cuts.

1984ReturnsForReal_2

"The government hasn't just thrown money at the banks, they've bought shares which ultimately they will almost certainly be able to sell at a nice profit for the tax payer."


:rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl:

sabretoothtigger

Not sure its as silly as it sounds since they will gain the company if they get nationalised obviously and this is the main reason for the low price.

The banks arent currently priced by the value of their assets but by the fact they are basically insolvent which doesnt mean those assets are worth less just they cannot be sold.
I might be summing it up wrongly but so long as the majority of their assets are connected to actual land ownership or loans backed on the value of this land then eventually at some point it should pay off because land is a good long term investment, it just might take 30 years

The main problem it might not work is if the interest paid by government is higher then the appreciation in the assets from their current low levels. Massive inflation, high interest rates and if government debt is in short term bills that need to be reissued kind of like the banks debt was short term also, it could get nasty

I would hope someone has considered the bottom line and put it into a report, Im pretty sure they've done the maths at some point

When we have seen previous rises of 100% in share prices, that number of smileys is not warranted No one knows what the long term is, thats the point me thinks

chopperharris

The govt own shares , they are invvestors.Thye do not own the banks themselves in the way you and I would normally think so ie they dont pay the wages or even the bonuses from their pockets.

True they nationalised two , the bonuses well they will still be coming from the benefactors employers books in those cases...not hmg coffers.

Bonuses will be taxed at a silly rate , HMG will probbaly get 40 percent of that bonus as tax.But I dont know where the poster is getting the idea that the money is coming from hmg , then to the person , then back again....sounds just like a barclays tax [STRIKE]evasion[/STRIKE] efficency to me , will they get it through the caymans via luxembourg and bermuda?

Another poster is right though bonuses are an essential part of both making profit and in cutting losses/expenditure.I am led to beleive that even civil servants can get bonuses , ie cut the operating costs and get a kickback etc.Its better than a bloody employee of the month star anyday.

But when it comes to fred and all the top players of banking , should there be any bonuses at all when there is really losses...then the answer can only be no.

Fred should have been sacked if he wasnt doing what his bosses wanted.... ie his job as directed by them.

Should the stafff themselves lose perfomance related bonuses, no.

Should fred have been sacked by the board , yes.They decided his bonuses , his pension , the board should have to pay his bonus not RBS or HMG .Take it from the boards own pockets/shares/pension etc.They hired him , they should have fired him , perhaps now he will become their whipping boy to save their own post rbs careers/pensions/shares .....and it looks like its now happening.

HMG cannot be both allowed to pay fred a bonus from its own pocket or to stop it.They didnt own rbs outright before he retired so never actually had him as their employee or hired him....nor did they call an egm even if they did own it.

I think the board would have done a walkout and worsened the situation further and faster for everyone if it had been an egm ousting.

The retrospective application of any new law to "grab" his pension will only see this at the ECHR.You simply cannot be allowed to retrospectively change the contract of an employee.If it does happen then that means every worker in any job is at risk of a right shafting in the future applied in their employee past.Think about this for a second a new owner comes in decides you should lose your bonus , holidays , company car , pension , or even take a retrograde pay cut....we open a pandoras box here.

Someone did royally fook up about the pension , it wasnt the downing street twins tweedledum and tweedledafter , it wasnt the tax payer , it wasnt the shareholders.We cant even blame fred , he only signed on the dotted line , someone else had to ok his contract.....thats where the buck lies.

Put lets those flaming bags of pooh where they really should be and ring the bloody bell.

StevieJ

CLAPTON wrote: »

amazing
the government has bought shares in banks and will sell at a profit... so why didn't all those private buyers go and buy those shares knowing they would be making a big profit (isn't that what capitalism is all about?).

I did I bought Barclays at 50p, nice little earner :beer:

sabretoothtigger

They're doing well today though I cant see why, selling off good business is a negative in many ways and surely the news is as good as its going to get for now

cloud_dog

1984ReturnsForReal wrote: »

"The government hasn't just thrown money at the banks, they've bought shares which ultimately they will almost certainly be able to sell at a nice profit for the tax payer."


:rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl:

Do some research, check out what happened in Sweden.

CLAPTON

StevieJ wrote: »

I did I bought Barclays at 50p, nice little earner :beer:

Well done... pity the Government didn't buy Barclays shares too.