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Is Alistair Darling set to introduce a bank bonus tax?

As we await the announcement of Alistair Darling's pre-budget report, expected at 1230 GMT, there are growing rumours that he has decided to include a 50% bank bonus tax in his plans for the short term. It is believed that a 50% levy on bonuses above £20,000 year will be introduced and payable by the banks in question. However, is this a political move or a revenue raising situation?

There is no doubt that a 50% tax on bank bonuses will raise at least some revenue for the UK government, but the real issue is the creation of some form of deterrent regarding the payment of large bonuses, at least in the short term. So far the UK government has "huffed and puffed" about the banking bonus issue, and banking salaries, but has lacked any real follow-through on earlier promises. Whether this rumoured move will be enough to attract the attention and gratitude of UK voters remains to be seen but we are now straying into the realms of political manoeuvring against economic prowess.

While the UK financial sector, and the banking industry in particular, has been portrayed as the devil incarnate it is easy to forget that this is now the major sector in the UK economy. The industry has traditionally brought in corporate tax revenues of over £7 billion year, not to mention income tax from each employee in the industry.

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