Deferred bonuses, so what?

I am vaguely aware that Goldman Sachs have decided to defer their bonuses until the additional rate of tax reduces to 45% in April.

I haven’t looked at any newspapers or websites, but I have seen from twitter mutterings and mentions of Margaret Hodge.

No further information is required to make a judgement though. It’s fine. It’s not tax avoidance.

If you want to moan about any aspect of it, you need to question the decision to announce the reduction in rate by a year.

On TolleyGuidance, on the day of Budget 2012, we published a news analysis piece about deferring income as a result of that announcement.

It’s an obvious result, surely?

If Parliament had intended to deprive individuals of the choice in deferring income it would have introduced anti-forestalling rules or waited until this Budget to announce the reduction.

For whatever reasons, the decision was made to advertise it in advance. If it doesn’t raise revenue, why they didn’t drop it immediately in April 2012 is beyond me.

But my personal axe to grind is this: Politicians are very keen to use the tax system for incentivising behaviours. In this respect they are more than willing to see reduced tax as an incentive or tax as a disincentive. They always seem quite optimistic as to how far people will go to save tax.

But when it comes to raising revenue, politicians always seem to downplay the behavioural impact of tax. It’s then a matter of morality, pure and simple. Optimism kicks in the other way.

The second you start playing folk psychologist with the tax system you compromise any aspect of fairness or morality.

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About Ben Saunders

I'm a Chartered Tax Adviser and a freelance writer. This is my personal blog about, well, mainly taxation. I might put other stuff in. Who knows.
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