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UK government forced to water down banking bonus tax

It has been revealed that the UK government took advice from Baroness Scotland, the attorney general, regarding plans to implement a specific tax on "guaranteed bonuses" within the banking sector. The advice confirmed that any specific move in this direction may infringe the "human rights" of bankers and would have stood little chance of holding up in court. As a consequence, the UK government decided to issue a general tax rate on "all" banking bonuses.

However, it has been revealed that "guaranteed bonuses" are not part of this blanket bank bonus tax program because the government is still concerned about a possible legal challenge in the courtrooms. There is even concern that the broader bank bonus tax charge could also hit the buffers if any financiers decided to take the government to court for a definitive ruling.

The truth is that the UK government has for some time been looking to curry favour with UK voters by hitting UK bankers and UK financiers in their pockets. However, when you consider that the UK financial sector brings in around £7 billion a year in corporation tax, with income tax on top of this, it is a vital income stream for the UK government and one which needs to be maintained in the short, medium and longer term. Can Gordon Brown really afford to upset those in the financial sector?

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