UK’s Darling slaps banks with one-off bonus tax

Banks operating in Britain will be charged a 50 percent tax rate on employees' bonuses above 25,000 pounds ($41,000), finance minister Alistair Darling said on Wednesday.

The levy — which will come into effect immediately and last until April 5 — is designed to address public anger at large bonus payments made by banks who have been bailed out with taxpayers' money.

The bonus tax will apply to all banks, building societies and branches of foreign banks operating in Britain and includes all discretionary payments such as shares, options and temporary salary increases.

"This one-off levy is expected to yield 550 million pounds," Darling told parliament, adding that anti-avoidance measures would be introduced with immediate effect. "This additional money will be used to pay for the extra measures, already announced, like help for the young and older unemployed to get back into work," he said.

The government hopes the move will encourage banks to use additional cash to shore up their capital bases, rather than pay high salaries. But banking groups have warned that penalising high earners in the financial sector will lead to an exodus of talent overseas.

European Central Bank Governing Council member Axel Weber said late on Tuesday that a windfall tax on bankers' bonuses would not be effective in encouraging less risky behaviour among banks in the long term.