'Multi-million bonuses shame City'

14 December 2007 - 2:10pm
Press release

The City of London today came under fire for paying out million of pounds in Christmas bonuses while denying many of the world's poorest countries the tax owed by British companies.

The anti-poverty charity War on Want attacked the City amid reports that dozens of London bankers at Goldman Sachs have been awarded bonuses of at least £5 million each in a record global bonus pool of £9 billion.

Leading earners included chairman Lloyd Blankfein, in line for £35 million, and Simon Dingemans, senior European mergers and acquisitions banker, who will get over £10 million in shares and cash. According to the reports, hundreds of top moneymakers at Goldman's Fleet Street offices will receive £500,000-plus after the company had an outstanding year advising on massive takeover deals.

Other banks are expected to hand out large bonuses, including Barclays Capital, DresdnerKleinwort, Lehman Brothers, UBS and Morgan Stanley.

The International Monetary Fund has branded the City an onshore tax haven for its role in helping companies dodge tax.

War on Want claims tax dodging and capital flight costs Africa an estimated £75 billion each year - five times what the continent receives in aid.

It says taxes paid by companies and individuals play a crucial part in enabling governments to fund essential public services, including healthcare, education, clean water and electricity.

But developing countries lose an estimated £250 billion every year as a direct result of corporate tax dodging - money which could be used to reach the UN's anti-poverty goals several times over. Among the goals is environmental sustainability, which engages UK environment secretary Hilary Benn this week at the Bali climate change talks.

Britain also loses an estimated £100 billion a year through tax dodges. This is enough to double funding for its health service, to cover the full state pension, end student fees and enable the UK to reach the UN aid target of 0.7 % of national income overnight.

War on Want says one popular way of dodging tax is to register companies in tax havens. Many of the world's tax havens are British - the City of London, Crown dependencies such as Jersey, Guernsey and the Isle of Man, or overseas territories, including the Cayman Islands, Bermuda and the British Virgin Islands. Tax havens allow firms to get away with paying minimal tax - and in some cases none at all. They also place little or no reporting requirements on companies, allowing them to keep secret the true sums they should be paying in tax. This then denies vital revenue to the countries in which those companies have made their profits.

Trade mispricing represents another favourite method of dodging tax. This involves selling items between different parts of a multinational corporation and deliberately mispricing the sales so as to shift the company's tax obligations to countries where the firm will pay less tax. In this way companies have "charged" themselves over £4,000 for a ballpoint pen and under £1 for a whole prefabricated building in order to dodge the tax they owe.

John Hilary, campaigns and policy director at War on Want, said: "It is a scandal that the City of London is handing out these bonuses while denying developing countries billions of pounds in tax owed. Executives on these bonuses can get to eye up luxury cars or second homes while millions of poor people struggle to survive. The government should make City firms pay their full taxes before dishing out these obscene Christmas bonuses."

 


 

CONTACT: Paul Collins, War on Want media office (+44) (0)20 7549 0584 or (+44) (0)7983 550728

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